Odyssean Investment Trust PLC Annual Financial Report (1457B)

TIDMOIT

RNS Number : 1457B

Odyssean Investment Trust PLC

31 May 2023

31 May 2023

ODYSSEAN INVESTMENT TRUST PLC

Annual Report and Financial Statements

for the year ended 31 March 2023

This announcement contains regulated information

Odyssean Investment Trust plc (the "Company" or "OIT") today announces

audited results for the year ended 31 March 2023

Investment Policy

The Company primarily invests in smaller company equities quoted on markets operated by the London Stock Exchange, where the Portfolio Manager believes the securities are trading below intrinsic value and where this value can be increased through strategic, operational, management and/or financial initiatives. Where the Company owns an influencing stake, it will engage with other stakeholders to help improve value. The Company may, at times, invest in securities quoted on other recognised exchanges and/or unquoted securities.

It is expected that the majority of the Portfolio by value will be invested in companies too small to be considered for inclusion in the FTSE 250 Index, although there are no specific restrictions on the market capitalisation of issuers into which the Company may invest.

The portfolio will typically consist of up to 25 holdings, with the top 10 holdings accounting for the majority of the Company's aggregate Net Asset Value ("NAV") across a range of industries. The Company will adhere to an exclusion-based investment approach to avoid investment in companies involved in activities the Company deems unethical and/or unsustainable.

The Company may hold cash in the Portfolio from time to time to maintain investment flexibility. There is no limit on the amount of cash which may be held by the Company from time to time.

Investment restrictions

- No exposure to any investee company will exceed 15 per cent. of Net Asset Value at the time of investment.

- The Company may invest up to 20 per cent. of Gross Assets at the time of investment in unquoted securities where the issuer has its principal place of business in the UK.

- The Company may invest up to 20 per cent. of Gross Assets at the time of investment in quoted securities not traded on the London Stock Exchange.

- The Company will not invest more than 10 per cent., in aggregate, of Gross Assets at the time of investment in other listed closed-end investment funds.

Ethical and sustainability investment restrictions

The Company will not invest(1) in companies which derive any revenue from, or are engaged in:

   -    the production or direct distribution of pornography; 

- the manufacture, production or retail of controversial weapons(2) (e.g. chemical, biological or nuclear weapons, cluster munitions, landmines), civilian firearms and ammunition;

   -    the manufacture of alcohol and tobacco products; 
   -    the ownership or operation of gambling facilities; 
   -    sub-prime and/or predatory lending; 

- oil and gas production (both conventional and unconventional, including shale oil and gas, coal seam gas, coal bed methane, thermal coal, tar sands, Arctic onshore/offshore deepwater, shallow water and other onshore/offshore) extraction and refining;

- animal experimentation or animal testing, (a) where there is a proven alternative and/or where testing is not mandated by regulation; or (b) where there is no proven alternative and/or the experimentation or testing is mandated by regulation, but where the investee company is not adhering to the "three Rs" ethics of Replacement, Reduction and Refinement.

The Company will not invest more than 10 per cent., in aggregate, of Gross Assets at the time of investment in companies involved in distributing, licensing, retailing or supplying tobacco and/or alcohol beverage products.

(1) The Company will base its analysis of an investee company's revenues and activities on publicly available information, and will exclude revenues and activities that are considered to be de-minimis, being those that represent less than 1% of the investee company's revenue.

(2) Controversial weapons are those that have an indiscriminate and disproportional humanitarian impact on civilian populations, the effects of which can be felt long after military conflicts have ended.

Borrowings

The Company does not intend to incur borrowings for investment purposes, although the Company may, from time to time, utilise borrowings over the short term for working capital purposes up to 10 per cent. of Net Asset Value at the time of borrowing.

Derivatives and Hedging

The Company will not use derivatives for investment purposes. It is expected that the Company's assets will be predominantly denominated in Sterling and, as such, the Company does not intend to engage in hedging arrangements, however, the Company may do so if the Board deems it appropriate for efficient portfolio management purposes.

General

The Company will not be required to dispose of any asset or to rebalance the Portfolio as a result of a change in the respective valuations of its assets.

The Company intends to conduct its affairs so as to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010.

Any material change to the Company's investment policy set out above will require the approval of Shareholders by way of an ordinary resolution at a general meeting and the approval of the Financial Conduct Authority. Non-material changes to the investment policy may be approved by the Board.

Financial Summary

 
                                          As at 31 March  As at 31 March 
Company performance                                 2023            2022  Change 
----------------------------------------  --------------  --------------  ------ 
Shareholders' funds                            GBP181.2m       GBP157.8m   14.8% 
NAV per share                                     160.4p          164.0p  (2.2)% 
Share price per share                             164.0p          166.0p  (1.2)% 
Share price premium to NAV per share(#)             2.2%            1.2% 
 
 
                                                Year ended      Year ended 
                                             31 March 2023   31 March 2022 
------------------------------------------  --------------  -------------- 
Revenue income per share*                             0.2p            0.5p 
Capital (losses)/gains per share*                   (4.1)p           23.5p 
Total (loss)/profit per share*                      (3.9)p           24.0p 
NAV total return per share(#)                       (2.2)%           17.7% 
NSCI ex IC plus AIM Total Return Index(#) 
 **                                                (13.4)%          (2.1)% 
 
                                                Year ended      Year ended 
Cost of running the Company                  31 March 2023   31 March 2022 
------------------------------------------  --------------  -------------- 
Annualised ongoing charges(#)                        1.45%           1.45% 
 
   #    Alternative Performance Measures (see Glossary). 
   *     Based on the weighted average number of shares in issue during the period. 
   **    Used by the Company as comparator, not a Benchmark. Source: Bloomberg. 

Past performance is not a guide to future performance.

Chairman's Statement

Introduction

I am pleased to present the Annual Report and Financial statements for Odyssean Investment Trust PLC ("OIT" or the "Company") covering the period from 1 April 2022 to 31 March 2023.

Performance

Over the year, the net asset value per share ("NAV per share") of your Company fell by 2.2%. That said, the Company's performance is creditable against the broad peer group and underlying markets during a period of considerable market turmoil. Over a matter of a few months, there has been a 400% increase in the absolute cost of money (i.e. interest rates) and this continues to have ramifications for both asset prices and company earnings. Moreover, as the Portfolio Manager details, UK equity funds are extremely out of favour, with open ended funds experiencing large redemptions.

The net assets of your Company increased during the period under review by GBP23.4m to GBP181.2m, representing a rise of 14.8% reflecting a steady issuance of shares above the NAV per share. This growth is extremely credible in the difficult environment and reflective of increased awareness of the Company's differentiated investment strategy, as well as the loyal, long-term shareholder base.

Our management team are navigating these markets well and I am confident we will make money out of them but some short-term volatility has to be endured.

Discount and Premium Management

The share price has tracked in line with the NAV per share over the period, albeit with some minor volatility across the late summer. The Company's shares ended the period trading at a moderate premium to its NAV per share.

The Company issued a total of 17.0m shares at a premium to NAV, which meant that there was no dilution to existing shareholders. Of these 1.2m were issued to the Portfolio Manager and connected parties. Stuart Widdowson sold a total of 753,300 shares during the year for personal reasons. He owned 1,171,425 shares at the year-end. Since the period-end and up to the date of this report a further 627,000 shares have been issued at a premium to NAV.

It is pleasing to note that the Company's average discount since IPO has been narrower than 0.5%. The Board believes that the Company's strong absolute and relative rating is driven by a number of factors including good performance, a differentiated strategy (only accessible to investors via OIT), effective communication with existing and potential investors, a clear discount control policy (including a periodic redemption facility), a well-balanced register of long-term shareholders and multiple features which align the interests of all stakeholders.

The Company's realisation facility coming up in the seventh year after initial admission, starting on 1 May 2024, should continue to anchor the price of our shares around NAV.

Dividend

The Directors expect that returns for shareholders will be driven primarily by capital growth of the shares rather than dividend income. No dividend is proposed for the year ended 31 March 2023.

Portfolio Manager

In spite of the double-digit relative NAV per share out-performance over the year, and the considerable relative outperformance over the three year test period, an absolute decline in the NAV per share over the period meant that the high watermark for the performance fee struck at the end of March 2022 was not exceeded. As a result, no performance fee was paid to the Portfolio Manager over the period.

Growth of the Company

The Board believes that the growth in the Company, described above, provides a number of benefits to shareholders including greater liquidity in the shares and a lower ongoing charges ratio as the fixed costs of the Company are spread over a larger asset base.

The Board is also of the view that investors typically prefer to invest in larger more liquid trusts and hence further growth in the Company's assets is likely to widen the universe of potential shareholders, stimulating more demand and liquidity, which ultimately should lead to less discount volatility. The Board will continue to look for opportunities to grow the Company through issuance or other strategic initiatives, where possible.

The Board

I am delighted to welcome Neil Mahapatra to the Board. Neil became a Director on 3 April. He has over 20 years finance and investment experience and is a managing partner at Kingsley Capital Partners LLP.

Annual General Meeting ("AGM")

The fifth AGM of the Company will take place at 12.00 noon on Thursday, 21 September 2023. The AGM will be held at the offices of Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD. The Notice convening the AGM together with explanations of the proposed resolutions can be found in the Notice of Meeting.

Outlook

At the time of this report, we have recently crossed the fifth anniversary since your Company's launch. The NAV per share has increased by more than 60%, during which time the relevant equity markets have made negligible progress.

Investor sentiment towards UK equities remains very poor, but the level of M&A activity from private equity and corporate buyers of quoted UK companies is extremely strong so far in 2023, indicative of many valuation anomalies. The Company has benefitted from this trend, and, absent a material re-rating of markets, is likely to continue to do so.

Investing in these market conditions can be challenging. The positive and negative attributes of quoted equity markets, particularly in less liquid smaller companies, is that recalibration can be frighteningly quick, with some potential overshoots. However what I observe as Chairman of this highly concentrated, specialist portfolio, is that the hands-on active management of our positions creates opportunities in bad days as well as good days. I have taken great comfort in watching your management team closely and although there are bumps in the road, we have a team who know their companies well and can move quickly to take advantage of situations.

The Portfolio Manager is also willing and able to engage with their portfolio companies to help bring about positive change, the benefits of which tend to be seen months later and deliver non-market driven returns.

With the considerable M&A driven exits of portfolio companies over the period, the Portfolio Manager has been busy re-allocating capital. As a result, portfolio turnover has been higher than expected for the strategy, but it is indicative of the current opportunity set that the Portfolio Manager has been able to find new investments so quickly.

It is also notable that the underlying portfolio generates the supermajority of revenues from outside of the UK. Far from being the stereotypical domestic smaller company exposed fund, the Company's portfolio enables shareholders to benefit from international growth opportunities. This feature, the concentration, and the avoidance of various sectors drives the differentiated performance against the indices and the broader peer group.

The Board shares the Portfolio Manager's view that notwithstanding short-term volatility and further potential short-term weakness, above trend long-term future returns are likely from this point. The lead indicator is likely to be data showing that the level of outflows from UK equity funds is slowing. Once fund flows stabilise and forced selling stops, it's likely that UK equities will re-rate, potentially quite sharply for less liquid smaller companies. The market backdrop for the level of absolute returns in the next five years appears more supportive than the first five years.

We are grateful for the ongoing support shown by shareholders during the period.

Jane Tufnell

Chairman

30 May 2023

Portfolio Manager's Report

Stuart Widdowson

Ed Wielechowski

Details of the Portfolio Manager

The Company's Portfolio Manager is Odyssean Capital LLP.

The Portfolio Manager was founded in 2017 by Stuart Widdowson and Harwood Capital Management Limited, an independently owned investment group, and is jointly owned by both parties. The Chairman of Odyssean Capital LLP is Ian Armitage, former CEO and Chairman of HgCapital.

The Portfolio Manager's investment team, Stuart Widdowson and Ed Wielechowski, identify and undertake research on potential investee companies as well as managing the portfolio. They draw on the experience of a three-strong Panel of Advisors, who have run and invested in multiple quoted and unquoted smaller companies. In addition, the investment team draws on the expertise and experience of Mr Armitage and Mr Christopher Mills, who sits on Odyssean Capital's Board as a Non-Executive JV Partner. Mr Armitage and Mr Mills have more than 85 years' combined investment experience in quoted and unquoted smaller companies.

Stuart Widdowson, Co-fund Manager

Stuart has spent the last 22 years investing in public and private UK small and mid-size corporates and a further two years providing investment advisory services in the same field.

Prior to founding the Portfolio Manager, Stuart was at GVQ Investment Management ("GVQ"), where he held the position of fund manager and head of strategic investments for more than seven years. During his time at GVQ, Stuart led the transformation of the performance of Strategic Equity Capital plc ("SEC") and significantly improved shareholder value. Stuart led SEC to win several industry awards and was recognised as Fund Manager of the Year at both the PLC and QCA awards in 2015.

Stuart began his career as a strategy consultant undertaking commercial due diligence and strategy projects for private equity and corporate clients. In 2001, he joined HgCapital and spent five years working on small and mid-cap leveraged buyouts in the UK and Germany. During this time, he worked on a number of public to private transactions of UK quoted companies.

Ed Wielechowski, Co-fund Manager

Ed joined the Portfolio Manager in December 2017 as a Fund Manager.

Prior to joining Odyssean Capital, Ed was a Principal in the technology team at HgCapital. He joined HgCapital in 2006 and worked on numerous completed deals, including multiple bolt-on transactions made by portfolio companies. He has additional quoted market experience, having led the successful IPO of Manx Telecom plc in 2014, as well as having evaluated and executed public to private transactions. Ed started his career as an analyst in the UK mergers and acquisitions department of JPMorgan in 2004.

The investment approach

Our investment approach applies the core elements of the private equity investment philosophy - highly focused, long-term, engaged 'ownership' style investment - to public markets. We believe that this approach creates a portfolio unlike that of many typical public equity funds and that, well executed, can offer attractive, differentiated, risk-adjusted returns.

- Highly concentrated portfolio: We look to build a highly concentrated portfolio of no more than 25 investee companies where we carry out intensive diligence, only investing behind our highest conviction ideas.

- Narrow focus: We are focused on smaller companies typically too small for inclusion in the FTSE 250 index. We believe this market is less efficient, offering more opportunities to find mis-pricings. Further, we believe the best investment decisions are made from a base of knowledge and experience, and we will make most investments in industry sectors that we and our advisors, know well (TMT, Services, Industrials and Healthcare).

- Targeting long-term holding periods: We will evaluate each investment opportunity over a three to five-year investment horizon. We have structured our business to reflect this belief and do not intend to run any capital which is redeemable over short time periods. To think like an 'owner' of a business we believe your capital should behave like one too.

- Engaged investment style: We are engaged investors. We like investing in companies which, whilst good, are underperforming their potential and where we see the opportunity for constructive corporate engagement to unlock improved sustainable returns for all stakeholders.

The Company's investment objective is to deliver long-term capital growth rather than outperform a specific index. Our differentiated investment approach, allied with our sector focus and the recently revised investment restrictions approved in January 2021, is likely to lead to periods of NAV per share performance materially different from those of the broader market. We fully anticipate this potential short-term performance variance and will focus on comparative investment performance on a rolling three-year basis.

The absolute return mentality of the strategy, allied with the desire to avoid being a forced seller, may lead to net cash balances being held over the long term. We anticipate a core range of 5-15% over the long term. Net cash balances will not be used as an attempt to market time, but to enable us to invest where blocks of stock are available rather than being required to sell a less liquid holding on short notice.

Implementing the investment strategy

There are three key factors we look for when we analyse a potential investment;

   1)    a valuation opportunity; 
   2)    in a higher-quality company; and 
   3)    with improvement potential. 

Our view is that buying at a fair price and supporting improved performance generates capital growth, while our quality filters mitigate losses in the event of unexpected headwinds.

Valuation

We look for two valuation factors in every investment. Firstly, what we refer to as "static valuation" - does the company trade at a discount to its current value? This is not only judged by traditional public market ratios. We also seek to model every company through the lens of a private equity buyer (of which we have considerable experience) as well as evaluating its attractiveness to strategic trade buyers.

Secondly, we are looking for companies which can grow their value over time - "dynamic valuation". We particularly look for situations where there are multiple, independent drivers of value creation present, and where management actions can unlock these. We believe seeking multiple value drivers makes an investment case more secure and less exposed to single areas of uncertainty or misjudgement.

Quality

We assess every potential investment against qualitative and quantitative quality criteria. The quality assessment is important to mitigate the risk of permanent capital destruction from investments which fail to achieve their value potential. In our experience, higher quality companies are more likely to maintain a minimum value through difficult times and are more able to attract high calibre management teams to rectify underperformance.

Improvement potential and engagement

We particularly like companies that are in some way underperforming relative to their potential, and where the current valuation does not price in the potential for improvement. Once invested, constructive corporate engagement can help to unlock value. Our mantra is to buy good businesses and sell excellent businesses. The spectrum of areas which can be improved is broad and includes operating performance, asset utilisation, overly complex business structures/organisation, strategic direction, poor M&A, investor relations, and governance and pay.

ESG in our investment process

We have historically focused on evaluating and engaging on corporate governance ("G") and financial performance as part of our investment process.

In January 2021, shareholders approved a change in the investment policy of the Company to implement negative screening of certain investments, deemed unethical and or involved in activities which were deemed unsustainable. These restrictions augment our approach to corporate engagement and provide clarity and certainty to investors and formalises the approach we have taken since we launched.

Our partnership with the specialist ESG data provider for smaller quoted companies, announced in December 2020, has enabled us to analyse all our portfolio companies' ESG performance. Many of these companies are too small to have attracted ratings from the major ESG rating agencies. As at the time of preparation, we have shared these reports with each of our portfolio companies.

This is in line with the pragmatic approach to E&S engagement given the more resource-constrained nature of smaller quoted companies. Our focus is on how boards approach sustainability, where the scope for improvement is, how progress is evaluated and how it is reported to investors. Our belief is that performing ahead of peers and market expectations on ESG should attract new shareholders, a higher rating and a lower cost of equity, all things which will drive enhanced returns and benefit the Company's shareholders.

Progress and performance in the past year

The year ended March 2023 can broadly be divided into two halves, with markedly differing performance for equity markets. The first half of the year through to the end of September was a challenging period for investors. Investor sentiment was poor as they digested a broad range of headwinds from rising inflation and tightening monetary policy, through UK political instability (three prime ministers and four chancellors in a year) and expectations of a looming recession with the tragic war in Ukraine raising the risk of winter energy rationing in Europe. Against this backdrop UK small and mid-cap markets were particularly weak posting declines of c.20%.

The second half of the year saw a shift in sentiment. Signs that inflation may be peaking allowed markets to see through to an eventual end to central bank tightening; a warm winter saw Europe's energy crunch pass and initial expectations of a deep and long recession revised against continued robust economic data. Markets showed some recovery on this improving outlook; in the UK mid-cap stocks rose c.15% in the six months from September with small-cap lagging this with a c.7% rise and the AIM index up c.1%.

The ultimate outcome of this volatile 12-month period was disappointing for small and mid-cap stocks in the UK. For the year as a whole mid-caps fell c.7%, small-caps c.13% and AIM by 21%.

One key consistent market trend has been the headwinds created by fund flows. During the 12 months to March 2023, Numis estimates 8% of the starting assets of UK Small and Mid Cap OEICs have been redeemed by investors, totalling GBP1.3bn,

The Company's net asset value ("NAV") per share fell 2.2% in the year and whilst negative in absolute terms, it materially exceeded the performance of the NSCI & AIM index (a comparator not a benchmark) which fell by 13.4%. On an absolute basis the net cash balance averaged 4% across the year.

The top five positive contributors to performance were Euromoney, Curtis Banks, Devro, Hyve and Ascential.

M&A and other corporate activity have been key drivers of the top contributors. Three of the top five contributors were also B2B media companies, a subsector we perceived as offering attractive risk/reward characteristics, where there has been considerable financial and trade buyer M&A activity.

In June Euromoney received a bid approach from a private equity consortium of Astorg and Epiris. The recommended bid at c.1,481p came with a lengthy period to completion (required for regulatory approvals); with limited likelihood of an interloper we sold our shares generating a 1.5x cash 50% IRR return from our investment. The majority of the proceeds from this sale were invested into Ascential.

Our investment thesis for Ascential was similar to that of Euromoney - both were multi divisional B2B media groups, trading at a discount to their sum- of-the-parts value, suffering from poor investor sentiment. The market capitalisations at the time of investment were both towards the high end of our focus area, but demonstrative of our investment strategy identifying attractive opportunities in slightly larger companies.

Curtis Banks was a particularly pleasing success story during the year. We initially invested in March 2021. The group, which had stable revenues, in our view had been historically under managed, and as a result was not generating the margins it should. Correcting this shortfall in potential, and driving an attractive return, could be delivered through operational change over a period of time, and made the group highly attractive to sector consolidators who already had efficient operating platforms. As a result of dialogue between a number of shareholders, material board change was announced in May 2022, with the new chairman instigating a strategic and operational review. In November the company received an approach from industry peer James Hay/Nucleus at 350p per share, representing a premium of 32%. With the bidder bringing significant synergies we saw a counter bid as unlikely and sold our shares into the market. Including dividends, the investment delivered a c.1.5x cash, >31% IRR return in a wider market that had fallen materially.

Devro and Hyve continued the theme of M&A activity in the period. Devro was one of OIT's first investments in 2018. We believed the market was overlooking the potential of new management to improve performance of the group whilst continuing to generate attractive cash flows. During our investment, management delivered on a successful self-help program, but the improved quality of the business was not fully reflected in the share price, and in February Devro received a bid from industry peer Saria Group at a c.65% premium. We exited our holding delivering a return, including dividends, of 1.7x cash, 19% IRR - a solid result in a broadly flat market.

Hyve demonstrates the unpredictability of M&A activity. Aided by our specialist dealer, we purchased just under 3% of the company in February. Within four weeks, the company was subject to a bid from Providence Private Equity. The bid at a c.40% premium delivered a 1.5x cash return. Given the short holding period, the IRR exceeded 8,000%.

The top five negative contributors to performance were NCC, Dialight, Benchmark, Flowtech and Xaar.

NCC delivered a material profit warning on the last day of the period, citing weakening demand from large US tech customers following layoffs and general cost cutting in the sector. Coming suddenly and late in the financial year, there has been limited ability for NCC to quickly reallocate resources to other parts of its assurance business (some parts are growing at 30% per annum, and assurance as a whole will grow in the current financial year). The company's shares fell sharply on this news. Against this trading weakness, NCC has made progress with changes in the management team and announced a strategic review to potentially crystallise value from its Software Resilience (or Escrow) division. We believe that the shares are trading at a significant discount to their sum-of-the parts value. Whilst the temporary loss of value is unfortunate, we believe that the shares are pricing in a very pessimistic view of the strategic value of the Assurance division, indicative of investor capitulation.

Dialight issued a profit warning in January for the year just finished, noting some large orders not landing in December. However, the order outlook remained robust, and the business continues to grow. A new chairman, Neil Johnson, has a proven track record of creating and crystalising shareholder value in multiple small and mid-cap quoted companies.

Benchmark released positive trading updates through the year showing progression in all its divisions. The company moved its listing to Oslo and potentially some overhang from this has weighed on shares. Flowtech and Xaar both released solid trading updates through the year and delivered on key operational objectives - new product launches and factory reorganisation at Xaar and group simplification and transactional website launch for Flowtech. Both suffered from market concerns on macro outlook which saw shares fall. The progress in reported financials and operations at both companies remains overlooked by the market.

The portfolio was on average 96% invested across the period. Net cash began the period at 1.6% and ended the period at 0.4%.

Portfolio development

The level of M&A across the portfolio, combined with volatile markets drove portfolio turnover at levels above those expected.

GBP109m was invested into stock purchases, a level of portfolio turnover higher than anticipated driven by increased M&A, leading to accelerated exits, selling down Chemring in the first quarter of the period (following the supernormal relative and absolute performance in the wake of the Ukraine war starting) as well as cash inflows of GBP28m following the issuance of new shares.

New investments totalled GBP72m across the period with nine new positions initiated. This represents an above trend number of new positions in a 12 month period (typically we would expect c.4-6). The market turmoil, exacerbated by political uncertainties and outflows amongst OEICs managed by our broader peer group, meant many opportunities to deploy capital into compelling risk/ reward situations, but where historically the companies had been too highly rated. Our larger new positions Ascential, XP Power, Hyve and Gooch & Housego are examples of positions well known to us where general market weakness alongside company specific issues allowed investment at attractive levels.

We made follow on investments totalling c.GBP37m across the period including in Xaar, Spire, Benchmark and Elementis. There were periods during the year where shares in these companies were sold off, despite solid trading updates. Additionally, we made a significant further investment in NCC, both prior to and on the day of the major profits warning (in part re-investing profits taken historically).

Through the period we realised GBP82m from disposals, with five positions fully exited raising GBP61m.

Four of the fully exited were Euromoney, Curtis Banks, Hyve and Devro. We also exited one smaller <2% "toe hold" position, where trading updates suggested our initial investment thesis was no longer valid.

Material realisations were taken from our position in Chemring which benefitted from strong demand and a robust rating supported by the ongoing conflict in the Ukraine, and Wilmington which has seen an ongoing strong recovery in demand for in-person training post COVID.

Industrials remains the largest sector exposure, reflecting the variety of special situations which remain unloved by many investors. The majority of the overall increase in exposure to the industrials sector over the past two years has been deployment of capital into the B2B electronics sector, through the investments in Xaar, XP Power, Gooch & Housego and Dialight. Our entry valuations are undemanding (often after quite material price and/or rating falls) and offer compelling medium to long-term risk reward opportunities.

During the period, average cash levels in the portfolio were lower than is typical for our investment strategy. This was a result of the large number of attractive investment opportunities that we were able to find.

Engagement with portfolio companies was centred around corporate governance, investor relations and ESG disclosure during the period. Of the 215 resolutions we voted on at general meetings, there were 19 votes against and no abstentions. As part of our engagement on broader ESG issues, we engage an external consultant to conduct a review of each of our investments against a proprietary ESG scoring system - the score of our companies increasing reflecting improved disclosure on ESG issues. We believe this will drive improved ESG performance over time.

Portfolio detail

At the end of the period under review, the portfolio comprised 18 companies.

Key updates through the period for each of our top 10 positions and our opinions on each are detailed below:

ELEMENTIS

A leading producer of specialty chemicals focused on personal care, talc and coatings markets.

% NAV: 13%

Sector: Industrials

Performance in period

Elementis delivered pleasing performance through 2022 with profit upgrades driven by strong performance in the Coatings and Personal Care divisions which benefitted from pricing actions and ongoing post COVID demand recovery respectively. The group's talc activities suffered a more challenging period with weak European auto demand and high energy prices both headwinds. Early 2023 saw the group complete the disposal of its Chromium chemicals division with proceeds used to materially reduce group leverage.

Outlook

We remain optimistic on the outlook. The management team has continued to deliver on self-help cost actions and has a further c.$19m of savings targeted. There is scope for a material recovery in profitability from the talc division when its end markets improve - the division has historically generated c.$25m of profits, but was breakeven in 2022. The group is exposed to any slowdown in industrial and construction demand for coatings in the near term, but the successful implementation of price rises, cost reduction and strong momentum from new product launches can offset any weakness. With strong cash generation to drive de-leveraging and a current share price underpinned by the value of the group's unique mineral assets (of which it has decades of supply), we see an attractive risk/reward balance at current levels.

ASCENTIAL

Provider of B2B data, events and digital commerce support platforms.

% NAV: 12%

Sector: TMT

Performance in period

The key update from Ascential during the period, alongside a beat of results for FY 2022, was the outcome of the group's strategic review, which resulted in the proposed break up the group. Management intends to split their business in three parts over the next 2 years; the Product Design division is to be sold with a significant portion of proceeds returned to shareholders; the Digital Commerce division is to be listed on NASDAQ and the remaining events focused assets will remain listed in London. This announcement drove a strong rise in share price.

Outlook

Despite the rise of shares in the period we still see them trading at a very meaningful discount to the full sum-of-the parts value. With catalysts in the coming year as the auction of the Product Design division progresses, we continue to see upside from current levels and the return potential feels asymmetrically skewed to the upside from this point.

XAAR

Leading independent designer and manufacturer of industrial inkjet print heads.

% NAV: 11%

Sector: Industrials

Performance in period

Xaar's trading updates through the period were broadly in line, with the group delivering organic revenue growth and improving margins despite headwinds from ongoing COVID lockdowns in China (a key end market for users of Xaar's products). Operationally, the group continued to make good progress. In early 2023 the first phase of a factory re-organisation to increase manufacturing capacity and reduce costs and the launch of the group's new 'Aquinox' print head. This product allows Xaar's unique printhead technology to print with aqueous inks opening significant new markets for the group notably in printing on textiles. Initial market reaction has been positive.

Outlook

We believe that Xaar potentially offers some of the most exciting capital upside in the portfolio. The group enjoys unique, world leading IP that gives its printheads advantages over competitors in the printing of highly viscous fluids. The new management team has re-purposed historic R&D investment into a product roadmap allowing Xaar to address new industry segments, increasing Xaar's addressable market. The Aquinox print head is a key step on this journey, and we expect a further key launch in the next 18 months to address the largest addressable market for the first time - Wide Format Graphics. Although it will take time for new launches to generate meaningful revenues, the positive client reception on Aquinox shows the potential opportunity for the group. Little of this upside seems to have been priced in by the market.

NCCGROUP

Leading independent provider of software escrow services and cyber security consulting provided through the Assurance division.

% NAV: 7%

Sector: TMT

Performance in period

NCC saw challenging trading through the end of the period. In late March the group announced a material downgrade to expectations driven by a sudden, sharp slowdown in demand for its cyber security segment from West Coast US based technology clients. This sudden fall off in demand reflected cost cutting and headcount reductions seen within this client group. The pace of demand weakening left NCC with little time to adjust its cost base. The resultant impact on profitability on NCC's Assurance division was material and shares fell sharply.

Despite these disappointing trading updates, other news is positive. In July the group appointed a new CEO with significant experience of building scale, growth businesses in cyber security. He completed a strategic review early in 2023 setting out investment to drive future growth and an intention to sell the group's lower growth but highly profitable Software Resilience division aiming to crystallise value from this sometimes overlooked asset.

Outlook

We remain confident in the value recovery potential from the current position. Whilst there is demand weakness in one client segment, NCC's cyber security offering continues to deliver growth in other areas, and has maintained all of its client relationships. The new CEO has a clear strategic vision, and the recent miss-steps increase the urgency in his plans to expand the group's offering, shift more work towards longer-term or recurring contracts and build delivery capacity in lower cost regions.

We believe the group's shares are undervalued on a sum-of-the-parts basis. Any successful crystallisation of value from the Software Resilience division at levels near current analyst expectations, would suggest the market puts little value on the group's cyber security operations. We see this as unrealistic given the group enjoys a material portion of revenue on longer-term managed service contracts, maintains a blue-chip client base and represents a unique, scale asset in what remains a secular growth market.

XP POWER

New top 10 position Leading manufacturer of power supplies and power converters.

% NAV: 7%

Sector: Industrials

New top 10 position

The group is a leading, global manufacturer of power supplies and power converters used in a range of B2B products in industrial, healthcare and semi-conductor end markets. XPP's products are commonly 'designed in' to their customer's platforms, offering longer-term revenue streams, whilst the design expertise and service level the group offers allow some pricing power. XPP shares were weak through 2022 driven by macro concerns (notably the group's exposure to the semi-conductor cycle), litigation from a competitor and, we believe, material forced sellers of shares on the group's register.

Despite some near-term uncertainty on industrial and semi-conductor demand, the group benefits from markets expected to grow well above GDP across the cycle, and has a track record of gaining market share. With ongoing geopolitical focus on building domestic semi-conductor manufacturing capacity the group is also exposed to a potential accelerating mid-term tailwind in one of its key end markets. Alongside this, we see upside in group's margins as it expands its low-cost manufacturing capacity with a new facility in Malaysia, rolls out a group wide ERP platform and further integrates its legacy M&A. We were able to build our position at prices as low as c.11x PE compared to the groups long run average rating of c.15x+, with a return to these ratings offering further upside.

FLOWTECH

Leading UK distributor of hydraulic and pneumatic components.

% NAV: 6%

Sector: Services

Performance in period

Flowtech's performance through 2022 was in-line with market expectations. Revenues grew c.5%, the distribution focused Flowtech division showing a moderate decline, offsetting strong growth in the solutions and services focused Fluidpower division. Group margins improved as the benefits of self-help actions and price rises began to be felt. Operationally the group made forward steps - completing the integration of a number of legacy brands, successfully launching a new online presence and shutting some legacy sites to reduce costs. Immediately after the period end, the group announced a new CEO, who joins from one of the highest performing UK quoted distribution groups.

Outlook

The developments at Flowtech in the period are highly positive. The past few years have been a phase of 'building the platform' with significant work on integrating legacy M&A and improving the groups internal and external facing systems. This work continues, with the group increasingly able to accelerate top-line growth, gaining market share and continuing to drive margins. We believe the new CEO has plenty of scope to help unlock and grow shareholder value.

SPIRE HEALTHCARE

Leading provider of private hospitals in the UK.

% NAV: 6%

Sector: Healthcare

Performance in period

Spire delivered a strong year in 2022. Revenue rose c.8% driven by strong demand in private healthcare (both self-pay and insured). EBITDA margin rose to c.17% supported by the mix shift away from NHS work and the group's delivery of c.GBP15m of cost savings, more than offsetting inflation and some ongoing cost headwinds from COVID. The group continued to deliver on the strategy set out in a recent capital markets day with development of new service areas around diagnostic clinics and primary care ongoing. Finally, we would also like to celebrate the ongoing high care quality scores Spire delivers, with 98% of sites rated 'good' or 'outstanding' by the CQC.

Outlook

Spire currently enjoys a number of exciting tailwinds. The group is a beneficiary of extended NHS waiting lists, driving strong demand from both self-pay and private medical insurance patients. This allows Spire to manage its capacity more efficiently and offset any potential wage inflation through mix and pricing actions. We remain positive on the capabilities of the Spire management team which has delivered an initial round of cost savings and expect some more from continuing to integrate historically separate operating hospitals. With the share price backed by significant free hold property, strong cash generation able to fund a number of exciting growth opportunities and a history of strategic interest in the asset we see further value ahead.

GOOCH & HOUSEGO

New top 10 position Manufacturer of photonics solutions for a variety of industrial end markets.

% NAV: 5%

Sector: Industrials

New top 10 position

Gooch and Housego is a leading manufacturer of high value, high IP photonic & electro-optic systems and components for a variety of industrial and defence end markets. The group's end markets are expected to grow significantly above GDP driven by secular trends towards adoption of photonics solutions and the group has historically bolstered this organic growth through acquisitions to add capability and new customer segments. Through 2022 shares were weak largely as a result of pandemic driven issues as Gooch suffered challenges around supply chain, a factory re-organisation and difficulties in hiring staff. Despite these issues, the group continued to report strong demand and record order books. A new, experienced CEO joined the group in September.

We see the Company's shares as undervalued given its quality and the scope for earnings to recover and grow. The group has hard to replicate, world leading IP, addressing markets that are large and growing. Recent investment in R&D should position the group well to deliver organic growth and exploit this market opportunity. The new CEO joins with a clear mandate to review group operations and we see significant scope for improvements in group operating margins to mid teen levels from c.7% in 2022. Alongside this, the group's current EV/Sales rating is 50% below the average of the last 15 years, below those of peers and precedent M&A transactions for businesses of this nature.

WILMINGTON

B2B information, training and media provider focused on the compliance, healthcare and professional business markets.

% NAV: 5%

Sector: TMT

Performance in period

Wilmington delivered strong trading updates through the period. The group continued to benefit from a return of in-person events and training, with demand reaching or exceeding levels seen pre-pandemic, and strong progression in the group's subscription businesses. Margins also rose through the period as the group benefitted from growth and tight cost management. Operationally, the group continues to invest in building single, integrated IT platforms for each of its divisions bringing together multiple legacy systems. Investment which should increase efficiencies and scalability going forward.

Outlook

Wilmington has continued its track record of delivery and we see more to come. Over recent years the management team have reorganised the group structure, disposed of non-core operations and built a stronger operating platform. With a lot of the 'heavy lifting' now done, and the headwinds of COVID past, the group can turn its attention to exploiting the investment of recent years by driving margins and enhancing growth.

The high levels of recurring revenue the group enjoys, strong cash conversion and the now net cash balance sheet gives Wilmington a highly valuable, stable base and we expect this to be added to with accretive M&A going forward. The current p/e rating, especially ex cash, is not demanding.

RWS

Leading global provider of language services, translation software and intellectual property services.

% NAV: 5%

Sector: TMT

Performance in period

RWS's performance in the period was mixed. As expected, trading was muted on the top line with growth held back by the introduction of the single EU unitary patent impacting patent translation demand, some weakness at certain large clients and RWS stepping away from some lower margin work. Against this, technology sales were strong. Margins delivered continued improvement through the period, benefitting from synergies from further integration of the SDL business (acquired in 2020) as well as early benefits from the new management's investment into streamlining operations.

Outlook

RWS is at the start of the strategic shift set out by the new management team in March 2022. This envisages a period of investment to enhance the group's product offer (including machine translation), improve operational efficiency and accelerate new business wins. We view the proposed strategy as sensible.

RWS remains a leader in a fragmented but growing industry. The business enjoys high recurring/repeat revenue and is highly cash generative. The group has a market leading product offer (notably across its technology suite) and is well placed to continue to gain share. Investing to maximise this opportunity has the potential to offer attractive returns. The shares have struggled recently, reflective of shorter-term concerns on current trading and concerns around the impact of ChatGPT on the business model in the long term.

The remaining eight investments represent between c.1% and c.4% of NAV each. These are spread across our core focus sectors and all offer scope to scale, subject to further due diligence and pricing remaining attractive.

Review of the first five years and Outlook

Markets have had plenty of events to deal with, making little headway since the launch of OIT. In this environment the investment strategy has proven both its differentiation (specifically being neither growth nor value) and robustness (specifically having valuation discipline on both buying and selling). As OIT has recently passed its five year milestone, it's worth reflecting on elements of the investment proposition and strategy we laid out in the prospectus, what has happened, and what might happen in the next five years.

We wrote of high absolute and relative long-term returns from smaller companies. Since IPO, our comparator index has risen by 1.8%, or 0.3% annualised, against an annualised return of 14.5% for the 63 years leading to December 2017. Conclusion: UK Smaller Companies' performance since our IPO has been statistically very poor compared with history and delivered a return below inflation. This unfavourable market backdrop compared with our absolute returns of more than 10% per annum over the period highlights the value our strategy can add over just "owning the market".

Since May 2018, UK indices have de-rated materially, 21% in the case of the Comparator Index. This de-rating highlights the achievement of generating such positive NAV per share growth over the period. Unlike many momentum strategies, our investment strategy does not rely on markets re-rating.

With current ratings low, we expect absolute market returns to provide far more of a tailwind to absolute returns from our strategy over the next five years. Given our strategy tends to be low beta, we would be surprised to continue to generate relative returns of 10% per annum above the market in a rising market.

Secondly, we highlighted the structural liquidity mismatch of funds investing in small and mid cap companies, specifically open-ended funds subject to daily inflows and outflows. We detailed the scope for the potential for valuation anomalies in companies with market capitalisations below GBP500m, that would be eschewed by managers of large open ended funds. As detailed earlier, the outflows, especially during the last 18 months, from open ended UK equity funds have been vicious, leading in some cases to forced selling. Our experience (and record) has shown these dynamics have allowed our strategy, executed through a closed ended investment company, to thrive and add value.

We believe outflows will eventually stabilise, leading to a re-rating of markets, which our investee companies should benefit from. However, it's difficult to anticipate fund management groups reversing the decision to exit investing in smaller companies. Hopefully, a strong rebound in performance from smaller companies will generate institutional inflows into existing and new funds focused on this historically high performing part of the market. In summary, a headwind we believe which will abate or even potentially reverse somewhat.

Thirdly, we wrote of sporadic sell-side research into UK smaller companies, exacerbated by the introduction of MiFID II, and the deterioration in research potentially leading to more pricing anomalies. This has been a tailwind for our deep-research, focused investment approach, enabling us to uncover investment opportunities which have generated attractive absolute returns, as well as we believe attractive reward/risk situations. We see limited likelihood, or any evidence to support the frequency and quality of sell-side research improving.

Over the past five years, we have undertaken all of our corporate engagement with portfolio companies in private. Whilst this can lead to change taking longer, we believe many of our corporate engagement initiatives have succeeded. We have not sought to act as a sole agitator, but have worked with other stakeholders and shareholders to firmly make the case for change or improvement. With shareholder registers continuing to concentrate, we believe engagement and change/self-help at our portfolio companies will continue.

Since launch, we have exited 25 investments. 10 of these (40%) were due to M&A/bid approaches, a higher number than expected at launch, leading to higher than expected portfolio turnover. These bids have been broadly spread out over the period, with the average Day 1 premium achieved of >48%. The number of takeovers and the premiums achieved are an excellent indication of our ability to find mispriced companies which, if struggling to attract public market investors, will prove to be takeover targets. In the short term, absent a re-rating of UK equities, the level of M&A could remain buoyant, and hopefully the Company's holdings can be beneficiaries at an appropriate price.

Of the c.60% of exits executed by selling shares in the market, 11 (or 44% of all exits) were where an investment had delivered to plan. Two (8% of all exits) were where the investment was broadly delivering, but we believed on balance more compelling risk/reward opportunities existed elsewhere. The last two (8% of all exits) were where there had been a thesis violation and we chose to exit regardless of the prevailing share price and at a capital loss. This low realised loss ratio is indicative of the focused and multi-stage investment process, which garners the views of a wide range of team members, including Ian Armitage, the Chairman of the management company, and our three strong Panel of Advisers.

Turning to current market conditions, alongside the ever-present uncertainties, the investment community is grappling with the outlook for inflation, interest rates and the risk of recession. The spectre of continued and material outflows remains for managers of open ended UK equity funds, despite UK equities being clearly extremely attractively valued on an absolute and relative basis compared to other major equity markets, especially US equities. The scale of the outflows in an environment of such attractive pricing is unprecedented within our careers. The behaviour is put into perspective by the feeding frenzy of financial and trade buyers announcing bid approaches for UK quoted companies (at the time of preparation c.15 live take privates/bid approaches have been announced for UK Small and Mid-cap companies since the beginning of 2023).

This bid activity is acting as a prop for overall market levels, in most cases providing cash and exit opportunities for fund managers to fund outflows.

The fund flow dynamics are not helping underlying liquidity. With such uncertainties about AUM levels, alongside trading and macro uncertainties, our contacts on the sell side report there is very little appetite for fund managers to consider investing in companies they do not already own. Not surprisingly the IPO market is shut.

There is scope for value creation from multiple levers across all of our holdings. Often, these initiatives can be driven by management irrespective of end market conditions. With such an international source of revenue across our portfolio companies, NAV growth is not anchored to the macro success or otherwise of one particular geography. There will be short-term surprises - negative and positive. Nevertheless, there is scope for healthy medium and long -- term returns.

We believe it's a buyer's market for UK equities, especially smaller companies, (demonstrated by the level of bid activity, particularly from private equity buyers) and the next five years will likely see markets as more of a tailwind to absolute returns from our investment strategy than the five years just gone.

Stuart Widdowson | Ed Wielechowski

Odyssean Capital LLP

30 May 2023

Portfolio of Investments

as at 31 March 2023

 
                                                 Country 
                                                  of          Cost  Valuation        % of 
Company                      Sector              Listing   GBP'000    GBP'000  Net Assets 
---------------------------  ------------------  --------  -------  ---------  ---------- 
Elementis                    Industrials         UK         18,468     23,820       13.1% 
Ascential                    TMT                 UK         19,269     21,690       12.0% 
Xaar                         Industrials         UK         15,054     20,775       11.5% 
NCC Group                    TMT                 UK         23,936     13,328        7.4% 
XP Power                     Industrials         UK         13,468     13,228        7.3% 
Flowtech Fluidpower          Business Services   UK         10,912     10,894        6.0% 
Spire Healthcare             Healthcare          UK          9,489     10,625        5.9% 
Gooch and Housego            Industrials         UK         10,234      9,266        5.1% 
Wilmington                   TMT                 UK          4,623      8,305        4.6% 
RWS Holdings                 TMT                 UK         10,613      8,222        4.5% 
---------------------------  ------------------  --------  -------  ---------  ---------- 
Top ten equity investments                                 136,066    140,153       77.4% 
---------------------------------------------------------  -------  ---------  ---------- 
Other equity investments*                                   46,876     40,241       22.2% 
---------------------------------------------------------  -------  ---------  ---------- 
Total equity investments                                   182,942    180,394       99.6% 
---------------------------------------------------------  -------  ---------  ---------- 
Cash and other net current 
 assets                                                                   811        0.4% 
---------------------------------------------------------  -------  ---------  ---------- 
Net assets                                                            181,205      100.0% 
---------------------------------------------------------  -------  ---------  ---------- 
 

* Other equity investments include eight investments, each represents between 1.6% and 4.1% of NAV. These are spread across our core focus sectors and all offer scope to scale, subject to further due diligence and pricing remaining attractive.

Business Review

The Strategic Report contains a review of the Company's business model and strategy, an analysis of its performance during the financial year ended 31 March 2023 and its future developments and details of the principal risks and challenges it faces. In particular, the Chairman's Statement and the Portfolio Manager's Report concentrate on the outlook for the current year and the factors likely to affect the position of the business. The Strategic Report has been prepared solely to provide information to shareholders to enable them to assess how the Directors have performed their duty to promote the success of the Company.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Further information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found in the Strategic Report.

Business model

Status of the Company

The Company was incorporated on 21 December 2017 and the IPO took place on 1 May 2018. It is registered in England and Wales as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006. The principal activity of the Company is to carry on business as an investment trust. The Company has been approved by HM Revenue & Customs as an authorised investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010, subject to there being no subsequent serious breaches of regulations. In the opinion of the Directors, the Company is directing its affairs so as to enable it to continue to qualify for such approval.

The Company's shares have a listing on the premium segment of the Official List of the FCA and trade on the London Stock Exchange's main market for listed securities.

The Company is a member of the AIC, a trade body which promotes investment companies and also develops best practice for its members.

Strategy for the year ended 31 March 2023 and Strategic Review

Throughout the year ended 31 March 2023, the Company continued to operate as an approved investment trust, following its investment objective and policy.

During the year, the Board made all strategic decisions for the Company. Odyssean Capital LLP and Frostrow Capital LLP undertook all strategic and administrative activities on behalf of the Board, which retained overall responsibility.

Purpose

The purpose of the Company is to achieve predominantly capital growth in our shareholders' wealth over time. It aims to achieve this by using its closed-ended structure to invest in a concentrated number of less liquid, higher-quality smaller quoted companies, which the Portfolio Manager believes are undervalued and could be generating higher returns for their shareholders. The long-term nature of the Company's capital enables the Portfolio Manager to undertake constructive corporate engagement with the underlying portfolio companies and their stakeholders, on financial and operating performance, strategy and sustainability, specifically ESG practices.

Sustainable improvement in a smaller quoted company's financial and operational performance, and ESG practices, not only benefit the shareholders of the Company, but also the shareholders and stakeholders in the underlying portfolio companies.

Investment objective

The investment objective of the Company is to achieve attractive total returns per share principally through capital growth over a long-term period.

Investment policy

The Company's full investment policy contains information on the policies which the Company follows, including in relation to borrowings, derivatives, hedging as well as ethical and sustainability investment restrictions. The Company invests primarily in smaller company equities quoted on markets operated by the London Stock Exchange where the Portfolio Manager believes the securities are trading below intrinsic value and where this value can be increased through strategic, operational, management and/or financial initiatives.

Any material change to the Company's investment policy would require the approval of shareholders by way of an ordinary resolution at a general meeting and the approval of the FCA. Non-material changes to the investment policy may be approved by the Board.

Portfolio analysis

A detailed review of how the Company's assets have been invested is contained in the Chairman's Statement and the Portfolio Manager's Report. A list of all the Company's investments is contained in the Portfolio of Investments within the Strategic Report.

Dividend Policy

It is the Company's policy to pursue attractive total returns principally through growth over the long term. The Company will comply with the investment trust rules regarding distributable income, which require investment trusts to retain no more than 15% of their investment income each year. The Company will only pay the minimum dividend required to maintain investment trust status. No dividend will be proposed for the year ended 31 March 2023.

The Board

The Board of the Company comprises Jane Tufnell (Chairman), Arabella Cecil, Peter Hewitt, Richard King and Neil Mahapatra (appointed on 3 April 2023), all of whom are independent non-executive Directors and, with the exception of Mr Mahapatra, served during the whole year under review and up to the date of signing the report. All Directors will stand for election or re -- election at the forthcoming Annual General Meeting.

Board Focus and Responsibilities

With the day to day management of the Company outsourced to service providers the Board's primary focus at each Board meeting is reviewing the investment performance and associated matters, such as, inter alia, future outlook and strategy, gearing, asset allocation, investor relations, marketing, and industry issues.

In line with its primary focus, the Board retains responsibility for all the key elements of the Company's strategy and business model, including:

-- Investment Objective and Policy, incorporating the investment guidelines and limits, and changes to these;

   --    whether the Manager should be authorised to gear the portfolio up to a pre-determined limit; 
   --    review of performance against the Company's key performance indicators ("KPIs"); 
   --    review of the performance and continuing appointment of service providers; and 
   --    maintenance of an effective system of oversight, risk management and corporate governance. 

Details of the principal KPIs, along with details of the principal risks, and how they are managed, are given in the Strategic Report.

Section 172 statement

Overview

The Directors' overarching duty is to act in good faith and in a way that is the most likely to promote the success of the Company as set out in Section 172 of the Companies Act 2006. In doing so, Directors must take into consideration the interests of the various stakeholders of the Company, the impact the Company has on the community and the environment, take a long-term view on consequences of the decisions they make as well as aim to maintaining a reputation for high standards of business conduct and fair treatment between the members of the Company.

Fulfilling this duty naturally supports the Company in achieving its investment objective and helps to ensure that all decisions are made in a responsible and sustainable way. In accordance with the requirements of the Companies (Miscellaneous Reporting) Regulations 2018, the Company explains how the Directors have discharged their duty under Section 172 below.

To ensure that the Directors are aware of, and understand, their duties they are provided with the pertinent information when they first join the Board as well as receiving regular and ongoing updates and training on the relevant matters. Induction and access to training is provided for new Directors. They also have continued access to the advice and services of the Company Secretary, and when deemed necessary, the Directors can seek independent professional advice. The schedule of Matters Reserved for the Board, as well as the Terms of Reference of its committees are reviewed on an annual basis and further describe Directors' responsibilities and obligations and include any statutory and regulatory duties. The Audit Committee has the responsibility for the ongoing review of the Company's risk management systems and internal controls and, to the extent that they are applicable, risks related to the matters set out in Section 172 are included in the Company's risk register and are subject to periodic and regular reviews and monitoring.

Stakeholders

A company's stakeholders are normally considered to comprise its shareholders, its employees, its customers, its suppliers as well as the wider community in which the company operates and impacts. The Company is different in that as an investment trust it has no employees and, significantly, its customers are synonymous with its shareholders. In terms of suppliers, the Company receives professional services from a number of different providers, principal among them being the Portfolio Manager. The Board believes that the wider community in which the Company operates encompasses its portfolio of investee companies and the communities in which they operate.

Details of how the Board considers the needs and priorities of the Company's stakeholders and how these are taken into account during all its discussions and as part of its decision-making are detailed below. All discussions involve careful considerations of the longer- term consequences of any decisions and their implications for stakeholders.

 
Stakeholder                 Board Engagement 
------------------------    ------------------------------------------------------------------ 
Shareholders 
------------------------    ------------------------------------------------------------------ 
Continued shareholder       The Board is committed to maintaining open channels of 
 support and engagement      communication and to engage with shareholders in a manner 
 are critical to             which they find most meaningful, in order to gain an 
 existence of the            understanding of the views of shareholders. These include: 
 business and the            - Annual General Meeting - The Company welcomes and 
 delivery of the             encourages attendance, voting and participation from 
 long-term strategy          shareholders at the AGM, during which the Directors and 
 of the Company.             the Portfolio Manager are available to discuss issues 
                             affecting the Company and answer any questions. The Portfolio 
                             Manager provides a presentation at the AGM on the Company's 
                             performance and its future outlook. The Company values 
                             any feedback and questions it may receive from shareholders 
                             ahead of and during the AGM. 
                             - Publications - The Annual and Interim Reports of the 
                             Company are made available on its website and the Annual 
                             Report is circulated to shareholders. These reports provide 
                             shareholders with a clear understanding of the Company's 
                             portfolio and financial position. This information is 
                             supplemented by a monthly fact sheet and regular presentations 
                             which are available on the website. Feedback and/or questions 
                             the Company receives from the shareholders help the Company 
                             evolve its reporting, aiming to render the reports and 
                             updates transparent and understandable. 
                             - Shareholder meetings - The Portfolio Manager and the 
                             Company's Broker are in regular contact with major shareholders. 
                             The Chairman and the other Directors are available to 
                             meet with shareholders to understand their views on governance 
                             and the Company's performance where they wish to do so. 
                             Shareholders are also able to meet with the Portfolio 
                             Manager and the Marketing Team of Frostrow Capital LLP 
                             ("Frostrow") throughout the year, either in person or 
                             via video conference. The results from all meetings between 
                             the Portfolio Manager, Frostrow, the Broker and shareholders, 
                             and the views of the shareholders are reported to the 
                             Board on a regular basis. 
                             - Shareholder concerns - In the event shareholders wish 
                             to raise issues or concerns with the Directors, they 
                             are welcome to do so at any time by writing to the Chairman. 
                             Other members of the Board are also available to shareholders 
                             if they have concerns that have not been addressed through 
                             the normal channels. Shareholders wishing to communicate 
                             directly with the Board should contact the Company Secretary 
                             at the Company's registered office address. 
                             - Investor relations updates - At every Board meeting, 
                             the Directors receive updates from the Company's Broker 
                             on the share trading activity, share price performance 
                             and any shareholders' feedback, as well as updates from 
                             the Portfolio Manager and from Frostrow. To gain a deeper 
                             understanding of the views of its shareholders and potential 
                             investors, the Portfolio Manager and Frostrow also meet 
                             regularly with shareholders. Any pertinent feedback is 
                             taken into account when Directors discuss the Company's 
                             share capital and any possible fundraisings. The willingness 
                             of the shareholders, including the partners and staff 
                             of the Portfolio Manager, to maintain their holdings 
                             over the long-term period is another way for the Board 
                             to gauge how the Company is meeting its objectives and 
                             suggests the presence of a healthy corporate culture. 
------------------------    ------------------------------------------------------------------ 
The Portfolio Manager 
---------------------------------------------------------------------------------------------- 
The Portfolio Manager's     The management of the Company's portfolio is delegated 
 performance is              to the Portfolio Manager, which manages the assets in 
 critical for the            accordance with the Company's objectives and policies. 
 Company to successfully     At each Board meeting, representatives from the Portfolio 
 deliver its investment      Manager are in attendance to present reports to the Directors 
 strategy and meet           covering the Company's current and future activities, 
 its objective to            portfolio of assets and its investment performance over 
 provide shareholders        the preceding period. 
 with attractive             Maintaining a close and constructive working relationship 
 total return over           with the Portfolio Manager is crucial as the Board and 
 a long-term period.         Odyssean Capital both aim to continue to achieve consistent, 
                             long-term returns in line with the Company's investment 
                             objective. Important components in the collaboration 
                             with the Portfolio Manager, representative of the Company's 
                             culture, are: 
                             - Operating in a fully supportive, co-operative and 
                             open environment and maintaining ongoing communication 
                             with the Board between formal meetings; 
                             - Encouraging open discussion with the Portfolio Manager, 
                             allowing time and space for original and innovative thinking; 
                             - Recognising that the interests of shareholders and 
                             the Portfolio Manager are for the most part well aligned, 
                             adopting a tone of constructive challenge, balanced with 
                             robust negotiation of the Portfolio Manager's terms of 
                             engagement if those interests should not be fully united; 
                             - Drawing on Board members' individual experience and 
                             knowledge to support the Portfolio Manager in its monitoring 

                             of and engagement with portfolio companies; and 
                             - Willingness to make the Board members' experience 
                             available to support the Portfolio Manager in the sound 
                             long-term development of its business and resources, 
                             recognising that the long-term health of the Portfolio 
                             Manager is in the interests of shareholders in the Company. 
                             The management arrangements are set out in greater detail 
                             in the Strategic Report. In addition to the management 
                             fee, the Portfolio Manager also receives a performance 
                             fee if certain circumstances are met. In respect of the 
                             year ended 31 March 2023, no performance fee has been 
                             accrued (2022: GBP2,436,000). 
------------------------    ------------------------------------------------------------------ 
Portfolio companies 
---------------------------------------------------------------------------------------------- 
The Company invests         The relationship with the Portfolio Manager is fundamental 
 into available              to ensuring the Company meets its purpose. Day-to-day 
 opportunities,              engagement with portfolio companies is undertaken by 
 allocating capital          the Portfolio Manager. Details of how Odyssean Capital 
 across different            carries out portfolio management, as well as information 
 portfolio companies         on its differentiated investment approach and the structuring 
 to meet the Company's       of investments can be found in the Portfolio Manager's 
 investment objectives       Report . The Board receives updates at each scheduled 
 within the pre-defined      Board meeting from the Portfolio Manager on specific 
 portfolio limits            investments including regular valuation reports and detailed 
 and with a focus            portfolio and returns analyses. Odyssean Capital's engagement 
 on portfolio level          with portfolio companies incorporates recurring due diligence 
 diversification.            reviews, active voting at their annual general meetings, 
                             discussions with their stakeholders (including but not 
                             limited to executives, non-executives, other shareholders 
                             and corporate advisors) and on-site visits. 
                             In particular, the Board strongly supports the Portfolio 
                             Manager in engaging with portfolio companies on ESG issues 
                             with the aim of improving operations, ESG standards and 
                             performance as well as company culture. 
------------------------    ------------------------------------------------------------------ 
Other service 
 providers 
------------------------    ------------------------------------------------------------------ 
In order to function        The Company's main functions are delegated to a number 
 as an investment            of service providers, each engaged under separate contracts. 
 trust with a premium        The Board, together with Frostrow as Company Secretary, 
 listing on the              maintains regular contact with its key external providers 
 London Stock Exchange       and receives regular reporting from them, both through 
 the Company relies          the Board and committee meetings, as well as outside 
 on a diverse range          of the regular meeting cycle. Their advice and views 
 of reputable advisors       are routinely taken into account. This regular interaction 
 for support in              provides an environment where issues and business developments 
 meeting all relevant        needs can be dealt with efficiently and collegiately. 
 obligations.                The Audit Committee reviews and evaluates the financial 
                             reporting control environments in place at each service 
                             provider. 
                             Through its Management Engagement Committee, the Board 
                             formally assesses their performance, fees and continuing 
                             appointment annually to ensure that the key service providers 
                             continue to function at an acceptable level and are appropriately 
                             remunerated to deliver the expected level of service. 
------------------------    ------------------------------------------------------------------ 
 

The above mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective.

Key topics of engagement with stakeholders and outcomes

 
Key topics of engagement with investors                       Actions taken and principal decisions 
----------------------------------------------------------    --------------------------------------------------------- 
 
  *    Ongoing dialogue with shareholders concerning the       *    The Portfolio Manager, Frostrow and the Broker meet 
       strategy of the Company, performance, the portfolio          regularly with shareholders and potential investors 
       and ESG issues.                                              to discuss the Company's Strategy, performance, the 
                                                                    portfolio and any ESG issues which might be raised. 
 
 
                                                               *    Shareholders are provided with performance updates 
                                                                    via the Company's website as well as the usual 
                                                                    financial reports and monthly factsheets. 
----------------------------------------------------------    --------------------------------------------------------- 
Key topics of engagement with the                             Actions taken and principal decisions 
 Portfolio Manager on an ongoing basis 
----------------------------------------------------------    --------------------------------------------------------- 
 
  *    Portfolio composition, performance, outlook and          *    Updates are received by the Board at every Board 
       business updates as well as ESG engagement with               meeting. 
       portfolio companies. 
----------------------------------------------------------    --------------------------------------------------------- 
Key topics of engagement with other                           Actions taken and principal decisions 
 service providers 
----------------------------------------------------------    --------------------------------------------------------- 
 
 *    The Directors have frequent engagement with the          *    During the year, no other specific action was 
      Company's other service providers through the annual          required in respect of the other service providers, 
      cycle of reporting and due diligence meetings and             as the reviews of their services have been positive 
      conversations with the Portfolio Manager. Frostrow,           and the Directors believe that their continued 
      as Company Secretary, has regular conversations with          appointment is in the best interest of the Company. 
      all other service providers on behalf of the Board 
      and the Management Engagement Committee. 
 
  *    This engagement is completed with the aim of 
       maintaining an effective working relationship and 
       oversight of the services provided. 
----------------------------------------------------------    --------------------------------------------------------- 
 

Culture

The Directors agree that establishing and maintaining a healthy corporate culture among the Board and in its interaction with the Portfolio Manager, shareholders and other stakeholders supports the delivery of the Company's goals. The Board seeks to promote a culture of openness, debate and integrity through ongoing dialogue and engagement with its service providers, principally, the Portfolio Manager.

The Board strives to ensure that its culture is in line with the Company's purpose, values and strategy. As detailed in the Corporate Governance Statement, the Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity, Directors' conflicts of interest and Directors' dealings in the Company's shares. The Board assesses and monitors compliance with these policies as well as the general culture of the Board through Board meetings and in particular, during the annual evaluation process which is undertaken by each Director.

The Board is cognisant of the nature of companies that the Company invests in and notes that their performance could fluctuate while the Portfolio Manager actively engages with them. This requires a culture of patience from the Board, supported by an orderly, disciplined investment management process by the Portfolio Manager. The Board pays particular attention to Odyssean Capital's corporate engagement initiatives and proxy voting policies. Additional information on the Board's approach to ESG matters is detailed in the Strategic Report.

The Board seeks to appoint the best possible service providers and evaluates their remit, performance and cost effectiveness on a regular basis. The Board considers the culture of the Portfolio Manager and other service providers, including their policies, practices and behaviour, through regular reporting from these stakeholders and, in particular, during the annual review of the performance and continuing appointment of all service providers through its Management Engagement Committee.

Responsible and Sustainable Investing

It is the Board's view that, in order to achieve long-term success, companies need to maintain high standards of corporate governance and corporate responsibility. More information is given in the Portfolio Manager's Report.

   *       Alternative Performance Measures (see Glossary). 

Climate Change

The risks associated with climate change represent an increasingly important issue and the Board and the Portfolio Manager are aware that the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. Therefore, no company's revenues are immune and the assessment of such risks must be considered within any effective investment approach.

Key Performance Indicators ("KPIs")

At each Board meeting, the Directors consider several performance measures to assess the Company's success in achieving its objective. The KPIs used to measure the progress and performance of the Company over time are established industry measures. These are as follows:

Net asset value

The NAV at 31 March 2023 was 160.4p per ordinary share, compared to 164.0p per ordinary share at the end of the previous period, a decrease of 2.2% (2022: an increase of 17.7%) The NAV total return* since the launch of the Company on 1 May 2018 to 31 March 2023 was 60.4%. The total return from the NSCI ex IC plus AIM Total Return Index* was 1.6% for the same period.

A full description of the Company's performance for the year ended 31 March 2023 can be found in the Portfolio Manager's Report.

Share price total return*

The Company's share price at the previous year end was 166.0p and decreased to 164.0p as at 31 March 2023, resulting in a return of -1.2% (2022: +28.7%) during the year.

Share price premium/(discount) to NAV*

The share price premium to NAV changed from 1.2% at the previous year end to premium of 2.2% as at 31 March 2023. During the year ended 31 March 2023, the shares traded at an average premium to NAV of 1.1%.

Revenue return per ordinary share

In the year to 31 March 2023, the Company made a revenue income of 0.2p per share (2022: revenue income of 0.5p per share).

Ongoing charges*

The Company's ongoing charges ratio for the year ended 31 March 2023 was 1.45% (2022: 1.45%).

Management Arrangements - Portfolio Manager

The Company is an internally managed investment company for the purposes of the UK's Alternative Investment Fund Managers Directive and is its own alternative investment fund manager. The Board is therefore responsible for the portfolio management and risk management functions of the Company.

Pursuant to the terms of the Portfolio Management Agreement, the Board has delegated responsibility for discretionary portfolio management functions to Odyssean Capital LLP as Portfolio Manager, subject always to the overall supervision and control of the Board.

The Company may terminate the Portfolio Management Agreement by giving the Portfolio Manager not less than six months' prior written notice. The Portfolio Manager may terminate the Portfolio Management Agreement by giving the Company not less than six months' prior written notice.

Management Fee

The Portfolio Manager is entitled to receive an annual management fee equal to the lower of: (i) 1% of the NAV (calculated before deduction of any accrued but unpaid management fee and any performance fee) per annum; or (ii) 1% per annum of the Company's market capitalisation. The annual management fee is calculated and accrues daily and is payable quarterly in arrears.

The Portfolio Manager is also entitled to reimbursement for all costs and expenses properly incurred by it in the performance of its duties under the Portfolio Management Agreement.

Performance Fee

In addition, the Portfolio Manager is entitled to a performance fee in certain circumstances.

During the year, in order to simplify the accounting treatment, the Board agreed to amend the settlement mechanism relating to the payment of any performance fee earned, to a payment wholly in cash rather than a combination of cash and the Company's ordinary shares. This amendment only affects such payments made when the Company's ordinary shares are trading at a premium to the NAV per share, as this already applies where the Company's shares are trading at a discount to the NAV per share. The requirement for the Portfolio Manager to use 50% of any performance fee payment to purchase the Company's ordinary shares remains in place. Such purchase to be made within four months of receipt of any cash payment. Further details regarding the performance fee can be found below.

The Portfolio Manager will continue to ensure that 50% of any performance fee earned by the Odyssean Capital LLP will be invested in the ordinary shares of the Company as a collective group rather than as individuals. The collective group includes Ian Armitage, Harwood Capital Management Limited, Stuart Widdowson and Ed Wielechowski.

The Company's performance is measured over rolling three-year periods ending on 31 March each year (each a "Performance Period"), by comparing the NAV total return per ordinary share over a Performance Period against the total return performance of the NSCI ex IC plus AIM Total Return Index (the "Comparator Index"). The first Performance Period ran from IPO to 31 March 2021.

A Performance Fee is payable if the NAV per ordinary share at the end of the relevant Performance Period (as adjusted to: (i) add back the aggregate value of any dividends per ordinary share paid (or accounted as paid for the purposes of calculating the NAV) to shareholders during the relevant Performance Period; and (ii) exclude any accrual for unpaid Performance Fee accrued in relation to the relevant Performance Period) (the "NAV Total Return per Share") exceeds both:

i) the NAV per ordinary share on the first business day of a Performance Period; in each case as adjusted by the aggregate amount of (i) the total return on the Comparator Index (expressed as a percentage); and (ii) 1% per annum over the relevant Performance Period (the "Target NAV per Share");

ii) the highest previously recorded NAV per ordinary share as at the end of the relevant Performance Period in respect of which a Performance Fee was last paid (the "High Watermark"); and

   iii)   with any resulting excess amount being known as the "Excess Amount". 

The Portfolio Manager will be entitled to 10% of the Excess Amount multiplied by the time weighted average number of ordinary shares in issue during the relevant Performance Period to which the calculation date relates. The Performance Fee will accrue daily.

Payment of a Performance Fee that has been earned will be deferred to the extent that the amount payable exceeds 1.75% per annum of the NAV at the end of the relevant Performance Period (amounts deferred will be payable when, and to the extent that, following any later Performance Period(s) with respect to which a Performance Fee is payable, it is possible to pay the deferred amounts without causing that cap to be exceeded or the relevant NAV total return per share to fall below both the relevant target NAV per share and the relevant High Watermark for such Performance Period, with any amount not paid being retained and carried forward).

Subject at all times to compliance with relevant regulatory and tax requirements, any Performance Fee paid or payable shall be satisfied as to 100% of its value in cash and the Portfolio Manager shall, as soon as reasonably practicable following receipt of such payment, use 50% of such Performance Fee payment to make market purchases of ordinary shares (rounded down to the nearest whole number of ordinary shares) within four months of the date of receipt of such Performance Fee payment.

Each such tranche of shares acquired by the Portfolio Manager will be subject to a lock-up undertaking for a period of three years post issuance or acquisition (subject to customary exceptions).

At no time shall the Portfolio Manager (and/or any persons deemed to be acting in concert with it for the purposes of the Takeover Code) be obliged, in the absence of a relevant whitewash resolution having been passed in accordance with the Takeover Code, to receive, or acquire, further ordinary shares where to do so would trigger a requirement to make a mandatory offer pursuant to Rule 9 of the Takeover Code. Where any restriction exists on the issuance of further ordinary shares to the Portfolio Manager, the relevant amount of the Performance Fee may be paid in cash.

Based on the performance of the Company to 31 March 2023, no performance fee (2022: GBP2,436,000) has been accrued in respect of the year ended 31 March 2023.

Administration Manager, Company Secretary and Marketing Specialist

Frostrow Capital LLP ("Frostrow") has been appointed as the Company's Administration Manager and Company Secretary as well as Marketing Manager. Frostrow is an independent provider of services to the investment companies sector and currently has a total of 15 investment company clients whose assets totalled approximately GBP20.1 billion as at the date of this report.

Administrative, company secretarial and marketing services are provided by Frostrow under an agreement dated 23 June 2020. An annual administration and management services fee of 22.5 basis points of the market capitalisation of the Company up to (but not including) GBP150 million, charged monthly in arrears, is payable. Frostrow's fees will reduce from 22.5 basis points to 20 basis points on market capitalization of the Company in excess of GBP150 million in size up to and including GBP500 million, and to 17.5 basis points on market capitalisation in excess of GBP500 million. The agreement may be terminated by either party on six months' written notice. Further details can be found in note 4 to the financial statements.

Custodian

RBC Investor Services Trust ("RBC") was appointed as the Company's Custodian pursuant to an agreement dated 22 March 2018. RBC is in charge of, inter alia, safekeeping and custody of the Company's assets, investments and cash, processing transactions and foreign exchange services, if necessary. The Company and the Custodian may terminate the Custody Agreement with 90 days' written notice.

Portfolio Manager Evaluation and Continuing Appointment

The Board keeps the ongoing performance of the Portfolio Manager under continual review and the Management Engagement Committee conducts an annual appraisal of the Portfolio Manager's performance and makes a recommendation to the Board about the continuing appointment of the Portfolio Manager.

The Management Engagement Committee has reviewed Odyssean's performance, with respect to their provision of portfolio management and other services. Due consideration was given to the quality and continuity of its personnel, succession planning and investment processes. Alongside the performance review, the Committee completed an appraisal of the terms of the Portfolio Management Agreement to ensure that the terms remained competitive and in the interest of the Company. The Portfolio Manager has executed the investment strategy according to the Board's expectations and it is the opinion of the Directors that the continuing appointment of the Portfolio Manager on the terms agreed is in the interests of shareholders as a whole.

Frostrow's Evaluation and Continuing Appointment

The review of the performance of Frostrow as Administration Manager, Company Secretary and Marketing Specialist is a continuous process carried out by the Board and a formal evaluation was undertaken by the Management Engagement Committee in May 2023. The Board believes that the continuing appointment of Frostrow Capital LLP under the terms described above, is in the interests of shareholders. In coming to this decision, the Board also took into consideration the quality and depth of experience of the management, administrative and company secretarial team that Frostrow allocates to the Company.

Company Promotion

The Company has appointed Frostrow to promote the Company's shares to professional investors in the UK and Ireland. As investment company specialists, the Frostrow team provides a continuous, pro-active marketing, distribution and investor relations service that aims to promote the Company by encouraging demand for the shares.

Frostrow actively engages with professional investors, typically discretionary wealth managers, some institutions and a range of execution-only platforms. Regular engagement helps to attract new investors and retain existing shareholders, and over time results in a stable share register made up of diverse, long-term holders.

Frostrow arranges and manages a continuous programme of one-to-one meetings with professional investors around the UK. These include regular meetings with "gate keepers", the senior points of contact responsible for their respective organisations' research output and recommended lists. The programme of regular meetings also includes autonomous decision makers within large multi-office groups, as well as small independent organisations. Some of these meetings involve Odyssean Capital LLP, but most of the meetings do not, which means the Company is being actively represented both to existing and potential investors, while the Portfolio Managers concentrate on the portfolio.

The Company also benefits from involvement in the regular professional investor seminars run by Frostrow in major centres, notably London and Edinburgh, and webinars which are focused on buyers of investment companies.

Frostrow produces many key corporate documents, monthly factsheets, annual and half-yearly reports. All Company information and invitations to investor events, including updates from the Portfolio Manager on portfolio and market developments, are regularly emailed to a growing database, overseen by Frostrow, consisting of professional investors.

Frostrow maintains close contact with all the relevant investment trust broker analysts, particularly those from Winterflood Securities Limited, the Company's corporate broker, but also others who publish and distribute research on the Company to their respective professional investor clients.

The Company further benefits from regular press coverage, with articles appearing in respected publications that are widely read by both professional and self-directed private investors. The latter typically buy their shares via retail platforms, which account for a significant proportion of the Company's share register.

Employees, Human Rights, Social and Community Issues

The Board recognises the requirement under Companies Act 2006 to detail information about human rights, employees and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these provisions, however, it does expect its service providers and portfolio companies to respect these requirements.

Integrity and Business Ethics

The Company is committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent the above. The Board's expectations are that its principal service providers have similar governance policies in place. The Company Secretary, on behalf of the Board, will seek assurances from service providers on a regular basis.

Environmental, Social and Governance ("ESG") issues

The Company has no employees, property or activities other than investments, so its direct environmental impact is minimal. In carrying out its activities and in its relationships with service providers, the Company aims to conduct itself responsibly, ethically and fairly.

The Board is comprised entirely of non-executive Directors and the day-to-day management of the Company's business is delegated to the Portfolio Manager. The Portfolio Manager aims to be a responsible investor and believes it is important to invest in companies that act responsibly in respect of environmental, ethical and social issues.

The Portfolio Manager is specifically looking to invest in companies which have average or above average ESG characteristics or practices, but where improvement potential exists. Being mindful of the smaller company nature of many of the portfolio companies, the Portfolio Manager has a pragmatic engagement approach, focused on dialogue with portfolio companies around their performance, disclosure and general practices compared with best-in-class peers, and seeking positive changes in specific areas. The Portfolio Managers will not invest in non-ethical or unsustainable businesses.

The Directors believe that proxy voting is an important part of the corporate governance process. It is the policy of the Company to vote at all shareholder meetings of investee companies, and the Board has delegated voting activities to the Portfolio Manager. The Portfolio Manager follows relevant regulatory requirements with an aim to make voting decisions which will best support growth in shareholder value and will commonly take into account best practices regarding corporate governance, board composition, remuneration and ESG issues. The Portfolio Manager also provides the Directors with a six-monthly update regarding the voting decisions made in respect of the investee companies.

Modern Slavery Act 2015

The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle does not have customers. The Directors do not therefore consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking.

The Company's suppliers are typically professional advisers and the Company's supply chains are considered to be low risk in this regard.

In light of the nature of the Company's business there are no relevant human rights issues and the Company does not have a human rights policy.

Risk Management

Principal Risks, Emerging Risks and Risk Management

The Board considers that the risks detailed within this report are the principal risks currently facing the Company to deliver its strategy.

The Board is responsible for the ongoing identification, evaluation and management of the of the principal risks faced by the Company and the Audit Committee, on behalf of the Board, has established a process for the regular review of these risks and their mitigation. This process accords with the UK Governance Code and the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

During the year ended 31 March 2023, the Audit Committee has again carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The Committee also considered the controls in place to mitigate the inherent risks and whether additional controls or actions were required to bring the residual risk down to an acceptable level. The Committee was satisfied with the controls that are in place.

Further details, including as a summary of the Company's approach to risk and how principal risks and uncertainties were dealt with during the year under review, are set out in the Strategic Report.

Internal Control Review

The Board is also responsible for the internal controls relating to the Company, including the reliability of the financial reporting process, and for reviewing their effectiveness.

Key procedures established with a view to providing effective financial control, have been in place throughout the year ended 31 March 2023 and up to the date of this Report. The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made and which are issued for publication is reliable and that the assets of the Company are safeguarded.

The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company's investment objective. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss.

The Directors have carried out a review of the effectiveness of the Company's risk management and internal control systems as they have operated during the year and up to the date of approval of this Report. There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Internal Control Assessment Process

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company's overall investment objective. During the year, the Board - through the Audit Committee and together with Frostrow - has confirmed its risk management controls under the key headings of: Corporate Strategy; Accounting, Legal and Regulatory; Operational; Investment and Business Activities. In evaluating the risks the Company faces, the Board has considered the Company's operations in the light of the following factors:

- the nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective;

   -    the threat of such risks becoming reality; 
   -    the Company's ability to reduce the incidence and impact of risk on its performance; 

- the cost to the Company and benefits related to the review of risk and associated controls of the Company; and

   -    the extent to which the third parties operate the relevant controls. 

A risk matrix helps to monitor the risks which have been identified and the controls in place to mitigate those risks. The risks are assessed on the basis of the likelihood of them happening, the impact on the business if they were to occur and the effectiveness of the controls in place to mitigate them. This risk register is reviewed by the Audit Committee regularly at every meeting.

Most of the day-to-day management functions of the Company are sub-contracted, and the Directors therefore obtain regular assurances and information from key third party suppliers regarding the internal systems and controls operating in their organisations. In addition, each of the third parties is requested to provide a copy of its report on internal controls each year, which is reviewed by the Audit Committee.

 
Principal risks and uncertainties                            Key mitigation 
---------------------------------------------------------    --------------------------------------------------------- 
Investment performance is not comparable to the 
expectations of investors 
---------------------------------------------------------    --------------------------------------------------------- 
Consistently poor performance could lead to a fall in the    The Board reviews and discusses the Company's performance 
share price and a widening of the                            against its investment objective 
discount. The success of the Company depends on the          and policy, and assesses performance in comparison to 
Portfolio Manager's ability to identify,                     industry peers and the broader comparative 
acquire and realise investments in accordance with the       market. The Board also keeps the performance of the 
Company's investment policy. This,                           Portfolio Manager under continual review, 
in turn, depends on the ability of the Portfolio Manager     along with a review of significant stock decisions and 
to apply its investment processes                            the overall rationale for holding the 
and identify suitable investments.                           current portfolio. In addition, the Management Engagement 
                                                             Committee conducts an annual appraisal 
                                                             of the Portfolio Manager. 
---------------------------------------------------------    --------------------------------------------------------- 
Share price performance 
---------------------------------------------------------    --------------------------------------------------------- 
The market price of the Company's shares, like shares in     The Board monitors the relationship between the share 
all investment companies, may fluctuate                      price and the NAV, including regular 
independently of the NAV and therefore may not reflect       review of the level of discount relative to that of 
the underlying NAV of the shares. The                        companies in the sector. The Company has 
shares could trade at a discount or premium to NAV at        taken powers to re-purchase shares and will consider 
different times, depending on factors                        doing so to reduce the volatility of 
such as market conditions, investors' perceptions of the     any share price discount. The Company has also taken 
merits of the Company's objective                            powers to issue shares (only at a premium 
and investment policy, supply and demand for the shares      to NAV) to provide liquidity to the market to meet 
and the extent investors value the                           investor demand by way of issue of further 
activities of the Company and/or the Portfolio Manager.      shares. 
                                                             No share buybacks were undertaken during the year. The 
                                                             Company issued a total of 16,697,000 
                                                             new shares through tap issuances all through the year 
                                                             (2022: 7,990,842 new shares through 
                                                             tap issuances). 
                                                             The Board and the portfolio management team all own 
                                                             shares in the Company, by way of aligning 
                                                             their own interests with those of all other shareholders. 
                                                             The Directors invest their Directors' 
                                                             fees in shares, which are bought at the end of every 
                                                             quarter, and the Portfolio Manager invests 
                                                             at least 50% of any performance fee in shares. 
                                                             In addition, in the seventh year following the IPO (and 
                                                             every seventh year thereafter), the 
                                                             Board will provide shareholders with an opportunity to 
                                                             realise their shares at the applicable 
                                                             NAV. 
---------------------------------------------------------    --------------------------------------------------------- 
Portfolio Manager - loss of personnel or reputation 
---------------------------------------------------------    --------------------------------------------------------- 
The identification and selection of investment               The Board maintains a good level of communication and has 
opportunities and the management of the day-to-day           a good relationship with the Portfolio 
activities of the Company depends on the diligence,          Manager, and regularly reviews the Portfolio Manager's 
skill, judgement and business contacts                       performance at Board meetings. The 
of the Portfolio Manager's investment professionals and      Portfolio Manager's Compliance Officer also reports to 
the information and deal flow they                           the Board regularly and the Portfolio 
generate during the normal course of their activities.       Manager would report to the Board immediately in the 
The Company's future success depends                         event of any change in key personnel. 
on the continuing ability of these individuals to provide    Odyssean Capital LLP as Portfolio Manager has appointed 
services and the Portfolio Manager's                         an investment team consisting of Stuart 
ability to strategically recruit, retain and motivate new    Widdowson and Ed Wielechowski, both of whom are very 
talented personnel as required.                              experienced in managing the portfolio 
The departure of some or all of the Portfolio Manager's      in accordance with the Company's principles and 
investment professionals could prevent                       investment strategy. 
the Company from achieving its investment objective and 
give rise to a significant public 
perception risk regarding the potential performance of 
the Company. 
---------------------------------------------------------    --------------------------------------------------------- 
Material changes within the Portfolio Manager's 
organisation 
---------------------------------------------------------    --------------------------------------------------------- 
Material changes could occur within the Portfolio            The Portfolio Manager has advance notice of any material 

Manager's organisation or its affiliates                     changes within its organisation and 
which are to the detriment of the Company's standing in      would report to the Board immediately in the event of any 
respect of its competitors and its                           such changes, including within its 
profitability.                                               organisation and affiliates or to its key personnel. 
Reliance on the performance of third party service 
providers 
---------------------------------------------------------    --------------------------------------------------------- 
The Company has no employees and the Directors have been     The Board has appointed third party service providers 
appointed on a non-executive basis.                          with relevant experience. Each third 
The Company is reliant upon the performance of third         party service provider is monitored by the Board and 
party service providers for its executive                    their roles are evaluated at least annually 
function. Failure by any service provider to carry out       by the Management Engagement Committee. 
its obligations to the Company in accordance                 The Board further receives a monthly report from 
with the terms of its appointment could have a material      Frostrow, which includes details of compliance 
adverse effect on the operation of                           with applicable law and regulations; reviews internal 
the Company.                                                 control reports and key policies of 
This encompasses disruption or failure caused by cyber       its service providers; has considered the increased risk 
crime or a pandemic and covers dealing,                      of cyber-attacks and has received 
trade processing, administrative services, financial and     assurances from its service providers regarding the 
other operational functions.                                 controls in place; and maintains a risk 
                                                             matrix with details of risks to which the Company is 
                                                             exposed, the approach to those risks, 
                                                             key controls relied on and the frequency of the controls 
                                                             operation. 
---------------------------------------------------------    --------------------------------------------------------- 
UK Regulatory Risk 
---------------------------------------------------------    --------------------------------------------------------- 
The regulatory environment in which the Company operates     The Board monitors regulatory change with the assistance 
changes materially, affecting the                            of Frostrow and external professional 
Company's modus operandi.                                    advisers to ensure that the Board is aware of any likely 
                                                             changes in the regulatory environment 
                                                             and will be able to adapt as required. 
---------------------------------------------------------    --------------------------------------------------------- 
UK Legal Risk 
---------------------------------------------------------    --------------------------------------------------------- 
The Company and/or the Directors fail to comply with         The Board monitors regulatory change with the assistance 
legal requirements in relation to FCA                        of its external professional advisers 
dealing rules and procedures, the AIFMD, the Listing         to ensure compliance with applicable laws and regulations 
Rules, the Companies Act 2006, relevant                      including the Companies Act 2006, 
accounting standards, the Bribery Act 2010, the Criminal     the AIFM Rules, the Corporation Tax Act 2010 ("Section 
Finances Act 2017, GDPR, tax regulations                     1158"), the Market Abuse Regulation 
or any other applicable regulations.                         ("MAR"), the Disclosure Guidance and Transparency Rules 
                                                             ("DTRs") and the FCA's Listing Rules. 
                                                             The Board reviews compliance reports and internal control 
                                                             reports provided by its service 
                                                             providers, as well as the Company's financial statements 
                                                             and revenue forecasts. 
                                                             The Directors attend seminars and conferences to keep up 
                                                             to date on regulatory changes and 
                                                             receive industry updates from the Company Secretary. The 
                                                             Company Secretary also presents a 
                                                             quarterly report on changes in the regulatory 
                                                             environment, including AIC updates, and how 
                                                             changes have been addressed. 
---------------------------------------------------------    --------------------------------------------------------- 
Governance Risk 
---------------------------------------------------------    --------------------------------------------------------- 
Poor adherence to corporate governance best practice or      The Board reviews all information supplied to 
errors or irregularities in published                        shareholders and Frostrow's marketing activity 
information could lead to censure and/or result in           at each meeting. 
reputational damage to the Company.                          Details of the Company's compliance with corporate 
                                                             governance best practice, including information 
                                                             on relationships with shareholders, are set out in the 
                                                             Corporate Governance Report in the 
                                                             Annual Report. 
---------------------------------------------------------    --------------------------------------------------------- 
ESG and Climate Change Risk 
---------------------------------------------------------    --------------------------------------------------------- 
Risks related to the environment, social issues and          At every Board meeting, the Board receives ESG updates, 
governance (ESG) such as the impact of                       which include information on any climate 
climate change or bad governance of portfolio companies      change and governance related engagement, from the 
could have an adverse impact on the                          Portfolio Manager together with monthly 
portfolio companies' operational performance.                portfolio updates. The Board challenges the Investment 
                                                             Manager on ESG matters to ensure that 
                                                             the portfolio companies are acting in accordance with the 
                                                             Board's ESG approach. 
                                                             The Portfolio Manager supports the UK Stewardship Code 
                                                             and actively engages with portfolio 
                                                             companies on ESG matters including climate change. 
                                                             Details of the Portfolio Manager's ESG approach can be 
                                                             found in the Portfolio Manager's Report 
                                                             and on the Company's website at www.oitplc.com. 
                                                             Furthermore, the Board has decided to hold some of its 
                                                             meetings, when possible, not in person 
                                                             but via video conference, to save on travel and reduce 
                                                             the Directors' carbon footprints on 
                                                             behalf of the Company. 
---------------------------------------------------------    --------------------------------------------------------- 
 

Emerging Risks

The Company has carried out a detailed assessment of its emerging and principal risks. The International Risk Governance Council's definition of an "emerging" risk is one that is new, or is a familiar risk in a new or unfamiliar context or under new context conditions (re-emerging). Failure to identify emerging risks may cause reactive actions rather than being proactive and, in a worst case scenario, could cause the Company to become unviable or otherwise fail or force the Company to change its structure, objective or strategy.

The Audit Committee reviews the Company's risk register at its half-yearly meetings. Emerging risks are discussed in detail as part of this process to try to ensure that emerging as well as well-known risks are identified and mitigated as far as possible.

Any emerging risks and mitigations are added to the risk register, an example being the invasion of Ukraine by Russia, which has led to shock waves in the markets and was followed by increasingly severe sanctions against Russia such as the boycott of Russian oil and gas by many countries and the blacklisting of Russian banks. Supply emergencies, distribution problems and price increases ensued and the Board and all its advisers continue to keep developments under close review.

The experience and knowledge of the Directors is useful in these discussions, as are update papers and advice received from the Board's key service providers such as the Portfolio Manager, Frostrow and the Company's brokers. In addition, the Company is a member of the AIC, which provides regular technical updates, draws members' attention to forthcoming industry and regulatory issues and advises on compliance obligations.

Going Concern

The content of the Company's portfolio, trading activity, the Company's cash balances and revenue forecasts, and the trends and factors likely to affect the Company's performance are reviewed and discussed at each Board meeting.

The Company's financial statements for the year ended 31 March 2023 have been prepared on a going concern basis.

In reaching this conclusion, the Board has considered a detailed assessment of the Company's ability to meet its liabilities as they fall due, including tests which modelled the effects of substantial falls in markets and significant reductions in market liquidity, on the Company's NAV, its cash flows and expenses. The assessments also factored in the risk of persistently high inflation, existing and potential further risks arising from Russia's invasion of Ukraine, and any ongoing risks from the COVID pandemic. Further information is provided in the Audit Committee report.

Based on the information available to the Directors at the date of this report, including the results of these stress tests, the conclusions drawn in the Viability Statement, the Company's cash balances, and the liquidity of the Company's listed investments, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months and that, accordingly, it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Longer-Term Viability Statement

In accordance with the UK Corporate Governance Code, the Directors have carefully assessed the Company's position and prospects as well as the principal risks and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years. The Board has chosen a three-year horizon in view of the long-term nature and outlook adopted by the Investment Manager when making investment decisions.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company's financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due:

- the portfolio is principally comprised of investments listed and traded on stock exchanges. These are actively traded and, whilst perhaps less liquid than larger quoted companies, the portfolio is well diversified;

- the portfolio is typically run with a net cash position (average of 5.5% in net cash over the past two years) and as a result there is ample liquidity on a day-to-day basis for the Company to meet its obligations;

- the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position; and

- the Company has no employees, only its non-executive Directors. Consequently, it does not have redundancy or other employment related liabilities or responsibilities.

The Audit Committee, as well as considering the potential impact of the Company's principal risks and various severe but plausible downside scenarios, has also considered the following assumptions in considering the Company's longer-term viability:

   -    there will continue to be demand for investment trusts; 

- the Board and the Portfolio Manager will continue to adopt a long-term view when making investments;

- the Company invests principally in the securities of UK listed companies to which investors will wish to continue to have exposure;

   -    regulation will not increase to a level that makes running the Company uneconomical; and 
   -    the performance of the Company will continue to be satisfactory. 

High inflation and the war in Ukraine were also factored into the key assumptions made by assessing its impact on the Company's key risks and whether they had increased in their potential to affect the normal, favourable and stressed market conditions.

Looking to the Future

The Board concentrates its attention on the Company's investment performance and Odyssean Capital LLP's investment approach and on factors that may have an effect on this approach.

The Board is regularly updated by Frostrow Capital LLP on wider investment trust industry issues and regular discussions are held concerning the Company's future development and strategy.

A review of the Company's year ended 31 March 2023, its performance and the outlook for the Company can be found in the Chairman's Statement and in the Portfolio Manager's Review.

The Company's overall strategy remains unchanged.

Approval

This Strategic Report has been approved by the Board of Directors and signed on its behalf by:

Jane Tufnell

Chairman

30 May 2023

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial period. Accordingly, the Directors have prepared the Financial Statements in accordance with IFRS as adopted by the United Kingdom. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Financial Statements, the Directors are required to:

- select suitable accounting policies in accordance with IAS 8: "Accounting Policies, Changes in Accounting Estimates and Errors" and then apply them consistently;

- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company's financial position and financial performance;

- state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Financial Statements;

   -    make judgements and accounting estimates that are reasonable and prudent; and 

- prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules of the FCA.

The Financial Statements are published on the Company's website, www.oitplc.com, which is maintained on behalf of the Company by Frostrow Capital LLP. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and accordingly, the Auditor accepts no responsibility for any changes that have occurred to the Financial Statements since they were initially presented on the website.

Under the Portfolio Management Agreement, the Portfolio Manager is responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

- the Financial Statements, which have been prepared in accordance with IFRS as adopted by the United Kingdom, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

- the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Jane Tufnell

Chairman

30 May 2023

Statement of Comprehensive Income

for the year ended 31 March 2023

 
                                                 Year ended 31 March        Year ended 31 March 
                                                         2023                       2022 
                                              Revenue  Capital    Total  Revenue  Capital    Total 
                                       Notes  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Income                                     2    2,720        -    2,720    2,573        -    2,573 
Net (losses)/gains on investments 
 at fair value                             7        -  (4,295)  (4,295)        -   24,137   24,137 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Total (loss)/income                             2,720  (4,295)  (1,575)    2,573   24,137   26,710 
Expenses 
Portfolio management and performance 
 fees                                      3  (1,718)        -  (1,718)  (1,459)  (2,436)  (3,895) 
Other expenses                             4    (785)        -    (785)    (663)        -    (663) 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Total expenses                                (2,503)        -  (2,503)  (2,122)  (2,436)  (4,558) 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Net (loss)/profit before taxation                 217  (4,295)  (4,078)      451   21,701   22,152 
Taxation                                   5     (12)        -     (12)        -        -        - 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Net (loss)/profit for the period                  205  (4,295)  (4,090)      451   21,701   22,152 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
Basic and diluted (loss)/earnings 
 per share (pence)                         6      0.2    (4.1)    (3.9)      0.5     23.5     24.0 
-------------------------------------  -----  -------  -------  -------  -------  -------  ------- 
 

The total column of this statement is the Income Statement of the Company prepared in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the United Kingdom. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the AIC ("AIC SORP").

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

There is no other comprehensive income, and therefore the profit for the period after tax is also the total comprehensive income.

The accompanying notes are an integral part of these financial statements.

Statement of Changes in Equity

for the year ended 31 March 2023

 
                                              Share        Special 
                                     Share  premium  distributable  Capital  Revenue 
                                   capital  account        reserve  reserve  reserve    Total 
                            ----- 
                            Notes  GBP'000  GBP'000        GBP'000  GBP'000  GBP'000  GBP'000 
--------------------------  -----  -------  -------  -------------  -------  -------  ------- 
Year ended 31 March 2023 
Opening balance as at 1 
 April 2022                            962   13,244         85,475   58,263    (128)  157,816 
Net (loss)/profit for the 
 year                                    -        -              -  (4,295)      205  (4,090) 
Net proceeds from share 
 issuance                      10      167   27,312              -        -        -   27,479 
--------------------------  -----  -------  -------  -------------  -------  -------  ------- 
As at 31 March 2023                  1,129   40,556         85,475   53,968       77  181,205 
--------------------------  -----  -------  -------  -------------  -------  -------  ------- 
 
 
                                                  Share        Special 
                                         Share  premium  distributable  Capital  Revenue 
                                       capital  account        reserve  reserve  reserve    Total 
                                Notes  GBP'000  GBP'000        GBP'000  GBP'000  GBP'000  GBP'000 
------------------------------  -----  -------  -------  -------------  -------  -------  ------- 
Year ended 31 March 2022 
Opening balance as at 1 
 April 2021                                883      449         85,245   36,562    (579)  122,560 
Net profit for the year                      -        -              -   21,701      451   22,152 
Net proceeds from share 
 issuance                          10       79   12,583              -        -        -   12,662 
Shares released from treasury      10        -      212            230        -        -      442 
------------------------------  -----  -------  -------  -------------  -------  -------  ------- 
As at 31 March 2022                        962   13,244         85,475   58,263    (128)  157,816 
------------------------------  -----  -------  -------  -------------  -------  -------  ------- 
 

The accompanying notes are an integral part of these financial statements.

Balance Sheet

as at 31 March 2023

 
                                                          31 March  31 March 
                                                              2023      2022 
                                                   Notes   GBP'000   GBP'000 
-------------------------------------------------  -----  --------  -------- 
Non current assets 
Investments at fair value through profit or loss       7   180,394   155,348 
-------------------------------------------------  -----  --------  -------- 
Current assets 
Trade and other receivables                            8     1,146       420 
Cash and cash equivalents                                    1,370     5,197 
-------------------------------------------------  -----  --------  -------- 
                                                             2,516     5,617 
Total assets                                               182,910   160,965 
-------------------------------------------------  -----  --------  -------- 
Current liabilities 
Trade and other payables                               9   (1,705)   (3,149) 
-------------------------------------------------  -----  --------  -------- 
Total liabilities                                          (1,705)   (3,149) 
Total assets less current liabilities                      181,205   157,816 
-------------------------------------------------  -----  --------  -------- 
Net assets                                                 181,205   157,816 
-------------------------------------------------  -----  --------  -------- 
Represented by: 
Share capital                                         10     1,129       962 
Share premium account                                       40,556    13,244 
Special distributable reserve                         10    85,475    85,475 
Capital reserve                                             53,968    58,263 
Revenue reserve                                                 77     (128) 
-------------------------------------------------  -----  --------  -------- 
Total equity attributable to equity holders of 
 the Company                                               181,205   157,816 
-------------------------------------------------  -----  --------  -------- 
Basic and diluted NAV per ordinary share (pence)      11     160.4     164.0 
-------------------------------------------------  -----  --------  -------- 
 

The accompanying notes are an integral part of these financial statements.

These statements were approved and authorised for issue by the Board on 30 May 2023 and signed on its behalf by:

Jane Tufnell

Chairman

Company Registered Number: 11121934

Cash Flow Statement

for the year ended 31 March 2023

 
                                                              Year ended  Year ended 
                                                                31 March    31 March 
                                                                    2023        2022 
                                                       Notes     GBP'000     GBP'000 
----------------------------------------------------  ------  ----------  ---------- 
Reconciliation of net (loss)/profit before taxation 
 to net cash outflow from operating activities 
Net (loss)/profit before taxation                                (4,078)      22,152 
Losses/(gains) on investments held at fair value 
 through profit and loss                                           4,295    (24,137) 
(Increase)/decrease in receivables                                 (282)          28 
(Decrease)/increase in payables                                  (2,337)         710 
Taxation paid                                                       (12)           - 
------------------------------------------------------------  ----------  ---------- 
Net cash outflow from operating activities                       (2,414)     (1,247) 
------------------------------------------------------------  ----------  ---------- 
Investing activities 
Purchases of investments                                       (107,939)    (90,568) 
Sales of investments                                              79,067      68,223 
------------------------------------------------------------  ----------  ---------- 
Net cash outflow from investing activities                      (28,872)    (22,345) 
------------------------------------------------------------  ----------  ---------- 
Financing activities 
Net proceeds from share issuance                                  27,479      12,662 
Shares released from treasury                                          -         442 

------------------------------------------------------------  ----------  ---------- 
Net cash inflow from financing activities                         27,479      13,104 
------------------------------------------------------------  ----------  ---------- 
Decrease in cash and cash equivalents                            (3,807)    (10,488) 
------------------------------------------------------------  ----------  ---------- 
Reconciliation of net cash flow movements in funds 
Cash and cash equivalents at the beginning of the 
 year                                                              5,197      15,689 
Exchange rate movements                                             (20)         (4) 
Decrease in cash and cash equivalents                            (3,807)    (10,488) 
------------------------------------------------------------  ----------  ---------- 
Decrease in net cash                                             (3,827)    (10,492) 
------------------------------------------------------------  ----------  ---------- 
Cash and cash equivalents at end of year                           1,370       5,197 
------------------------------------------------------------  ----------  ---------- 
 

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements

for the year ended 31 March 2023

1. Accounting Policies

Odyssean Investment Trust PLC is a listed public company incorporated and registered in England and Wales. The registered office of the Company is 25 Southampton Buildings, London WC2A 1AL. The principal activity of the Company is that of an investment trust company within the meaning of sections 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

   a)   Basis of preparation 

The financial statements of the Company have been prepared in accordance with IFRS as adopted by the United Kingdom which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the provisions of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS.

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been prepared alongside the Income Statement.

The functional currency of the Company is Sterling because this is the currency of the primary economic environment in which the Company operates. The financial statements are also presented in Sterling rounded to the nearest thousand, except where otherwise indicated.

   b)   Going concern 

The financial statements have been prepared on a going concern basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has the resources to continue in business for the foreseeable future, being a period of at least 12 months from the date these financial statements were approved. In making the assessment, the Directors have considered the likely impacts of high inflation and the Russia/Ukraine conflict on the Company, operations and the investment portfolio. The Directors noted the net cash balance exceeds any short-term liabilities, the Company has no debt and the Company holds a portfolio of investments listed on the London Stock Exchange The Company is a closed end fund, where assets are not required to be liquidated to meet redemptions. Whilst the economic future is uncertain, and the Directors believe it is possible the Company could experience further reductions in income and/or market value this should not be to a level which would threaten the Company's ability to continue as a going concern. The Directors, the Portfolio Manager and other service providers have put in place contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast doubt upon the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company's financial position in respect of its cash flows, debt and investment commitments. Therefore, the financial statements have been prepared on a going concern basis.

   c)   Segmental reporting 

The Directors are of the opinion that the Company is engaged in a single segment of the business, being investment business. The Company invests in small companies principally based in countries bordering the North Atlantic Ocean.

   d)   Accounting developments 

In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements.

The adoption of the changes has had no material impact on the current or prior years' financial statements.

   e)   Critical accounting judgements and key sources of estimation uncertainty 

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The areas requiring the most significant judgement and estimation in the preparation of the financial statements are: recognising and classifying unusual or special dividends received as either revenue or capital in nature; when determining any deferred performance fee, this may be affected by future changes in the Company's portfolio and other assets and liabilities; and setting the levels of dividends paid and proposed in satisfaction of both the Company's long-term objective and its obligations to adhere to investment trust status rules under Section 1158 of the Corporation Tax Act 2010.

The estimates and underlying assumptions are reviewed on an ongoing basis. Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods. There are no significant judgements or estimates in these financial statements.

During the year ended 31 March 2023, the Company has received no unusual or special dividend (2022: GBPnil); no performance fee has been accrued (2022: GBP2,436,000) or deferred (2022: GBPnil).

   f)    Investments 

The Company's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis in accordance with the documented investment strategy and information is provided internally on that basis to the Company's Board of Directors and other key management personnel.

The investments held by the Company are designated by the Company as 'at fair value through profit or loss'. All gains and losses are allocated to the capital return within the Statement of Comprehensive Income as 'Gains or losses on investments held at fair value through profit or loss'. Also included within this heading are transaction costs in relation to the purchase or sale of investments. When a sale or purchase is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date.

All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the closing price for Stock Exchange Electronic Trading Service ("SETS"). The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of consideration received and receivable and the cumulative gain or loss that had been accumulated is recognised in profit or loss.

Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation (the "IPEV") guidelines. These may include recent arm's length market transactions, earnings multiples and the net asset basis.

All investments for which a fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy levels set out in note 7.

   g)   Foreign currency translation 

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Items that are denominated in foreign currencies are retranslated at the rates prevailing on the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is capital or revenue in nature.

   h)   Cash and Cash Equivalents 

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purpose of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

   i)    Trade and other receivables and payables 

Trade receivables and trade payables are measured at amortised cost and balances revalued for exchange rate movement. There are immaterial expected credit losses on the trade and other receivables balance.

   j)    Income 

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Dividends from overseas companies are shown gross of any withholding taxes which are disclosed separately in the Statement of Comprehensive Income.

Special dividends are taken to the revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as capital or revenue receipt, the Board reviews all relevant information as to the sources of the dividend on a case-by-case basis.

When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.

All other income is accounted on a time-apportioned accruals basis and is recognised in the Statement of Comprehensive Income.

   k)   Expenses 

All expenses are accounted on an accruals basis and are allocated wholly to revenue with the exception of the Performance Fees and transaction costs which are allocated wholly to capital, as the fee payable by reference to the capital performance of the Company.

   l)    Taxation 

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with recommendations of the SORP, the allocation method used to calculate the tax relief expenses charged to capital is the 'marginal' basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

m) Dividends payable to shareholders

Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date.

   n)   Share capital and reserves 

The share capital represents the nominal value of equity shares.

The share premium account represents the accumulated premium paid for shares issued above their nominal value less issue expenses.

The special distributable reserve was created on 7 August 2018. This reserve may be used for the costs of share buybacks, the cancellation of shares, and distribution by way of dividends.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. In addition, performance fee costs are allocated to the capital reserve.

The revenue reserve represents the surplus of accumulated revenue profits being the excess of income derived from holding investments less the costs associated with running the Company. This reserve may be distributed by way of dividends, if positive.

2. Income

 
                          Year ended  Year ended  Year ended  Year ended  Year ended  Year ended 
                            31 March    31 March    31 March    31 March    31 March    31 March 
                                2023        2023        2023        2022        2022        2022 
                              Income     Capital       Total      Income     Capital       Total 
                             GBP'000     GBP'000     GBP'000     GBP'000     GBP'000     GBP'000 
------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Income from investments 
UK dividends                   2,170           -       2,170       2,573           -       2,573 
Overseas dividends               420           -         420           -           -           - 
------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
                               2,590           -       2,590       2,573           -       2,573 
------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Other income 
Bank Interest                    130           -         130           -           -           - 
------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
Total income                   2,720           -       2,720       2,573           -       2,573 
------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

3. Portfolio management fee

 
                         Year ended 31 March 2023      Year ended 31 March 2022 
                        Revenue   Capital     Total   Revenue   Capital     Total 
                        GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
---------------------  --------  --------  --------  --------  --------  -------- 
Portfolio management 
 fee                      1,718         -     1,718     1,459         -     1,459 
Performance fee               -         -         -         -     2,436     2,436 
---------------------  --------  --------  --------  --------  --------  -------- 
                          1,718         -     1,718     1,459     2,436     3,895 
---------------------  --------  --------  --------  --------  --------  -------- 
 

The Company is liable to pay a performance fee depending on the performance of the Company over a three -- year period and thereafter a rolling three-year period as set out in the Company's prospectus dated 26 March 2018. Based on the performance of the Company to 31 March 2023, no performance fee has been accrued (2022: GBP2,436,000).

Pursuant to the terms of the Portfolio Management Agreement, the Portfolio Manager is entitled, with effect from IPO on 1 May 2018, to receive an annual management fee equal to the lower of: (i) 1% of the NAV (calculated before deduction of any accrued but unpaid management fee and any performance fee) per annum; or (ii) 1% per annum of the Company's market capitalisation. The annual management fee is calculated and accrues daily and is payable quarterly in arrears.

In addition, the Portfolio Manager will be entitled to a performance fee in certain circumstances.

The Company's performance is measured over rolling three-year periods ending on 31 March each year (each a "Performance Period"), by comparing the NAV total return per ordinary share over a Performance Period against the total return performance of the NSCI ex IC plus AIM Total Return Index (the "Comparator Index"). The first Performance Period ran from IPO to 31 March 2021.

A Performance Fee is payable if the NAV per ordinary share at the end of the relevant Performance Period (as adjusted to: (i) add back the aggregate value of any dividends per ordinary share paid (or accounted as paid for the purposes of calculating the NAV) to shareholders during the relevant Performance Period; and (ii) exclude any accrual for unpaid Performance Fee accrued in relation to the relevant Performance Period) (the "NAV Total Return per Share") exceeds both:

(i) (a) the NAV per ordinary share at IPO, in relation to the first Performance Period; and (b) thereafter the NAV per ordinary share on the first business day of a Performance Period; in each case as adjusted by the aggregate amount of (i) the total return on the Comparator Index (expressed as a percentage); and (ii) 1% per annum over the relevant Performance Period (the "Target NAV per Share");

(ii) the highest previously recorded NAV per ordinary share as at the end of the relevant Performance Period in respect of which a Performance Fee was last paid (or the NAV per ordinary share as at IPO, if no Performance Fee has been paid) (the "High Watermark"); and

(iii) with any resulting excess amount being known as the "Excess Amount".

The Portfolio Manager will be entitled to 10% of the Excess Amount multiplied by the time weighted average number of ordinary shares in issue during the relevant Performance Period to which the calculation date relates. The Performance Fee will accrue daily.

Payment of a Performance Fee that has been earned will be deferred to the extent that the amount payable exceeds 1.75% per annum of the NAV at the end of the relevant Performance Period (amounts deferred will be payable when, and to the extent that, following any later Performance Period(s) with respect to which a Performance Fee is payable, it is possible to pay the deferred amounts without causing that cap to be exceeded or the relevant NAV total return per share to fall below both the relevant target NAV per share and the relevant High Watermark for such Performance Period, with any amount not paid being retained and carried forward).

Subject at all times to compliance with relevant regulatory and tax requirements, any Performance Fee paid or payable shall be satisfied as to 100% of its value in cash and the Portfolio Manager shall, as soon as reasonably practicable following receipt of such payment, use 50% of such Performance Fee payment to make market purchases of ordinary shares (rounded down to the nearest whole number of ordinary shares) within four months of the date of receipt of such Performance Fee payment.

Each such tranche of shares acquired by the Portfolio Manager will be subject to a lock-up undertaking for a period of three years post issuance or acquisition (subject to customary exceptions).

At no time shall the Portfolio Manager (and/or any persons deemed to be acting in concert with it for the purposes of the Takeover Code) be obliged, in the absence of a relevant whitewash resolution having been passed in accordance with the Takeover Code, to receive, or acquire, further ordinary shares where to do so would trigger a requirement to make a mandatory offer pursuant to Rule 9 of the Takeover Code. Where any restriction exists on the issuance of further ordinary shares to the Portfolio Manager, the relevant amount of the Performance Fee may be paid in cash.

In addition, the Portfolio Manager is entitled to reimbursement for all costs and expenses properly incurred by it in the performance of its duties under the Portfolio Management Agreement.

The Company may terminate the Portfolio Management Agreement by giving the Portfolio Manager not less than six months' prior written notice. The Portfolio Manager may terminate the Portfolio Management Agreement by giving the Company not less than six months' prior written notice.

4. Other expenses

 
                                                     Year ended    Year ended 
                                                       31 March      31 March 
                                                           2023        2022 
                                                        GBP'000       GBP'000 
---------------------------------------------------  ----------  ------------ 
Frostrow Capital                                            385         334 
Directors' fees*                                             92          89 
Broker fees                                                  60          60 
Auditor fees**                                               52          39 
Depositary and Custody fees                                  29          30 
Registrar fees                                               21          13 
Other expenses                                              146          98 
---------------------------------------------------  ----------  ---------- 
                                                            785         663 
---------------------------------------------------  ----------  ---------- 
 
 

* Peter Hewitt is not receiving a Director fee in respect of his services to the Company. Each of the Directors has agreed to use their applicable Directors' fees (net of applicable taxes) to acquire ordinary shares in the secondary market, subject to regulatory requirements. In relation to any dealings, the Directors will comply with the share dealing code adopted by the Company in accordance with the Market Abuse Regulation. The Board will be responsible for taking all proper and reasonable steps to ensure compliance with the share dealing code by the Directors.

** Exclusive of VAT. The Company's auditor provided no non-audit services (2022: none) during the year.

5. Taxation

 
                               Year ended 31 March 2023      Year ended 31 March 2022 
                              Revenue   Capital     Total   Revenue   Capital     Total 
                              GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
---------------------------  --------  --------  --------  --------  --------  -------- 
Analysis of charge in year 
Current tax: 
Overseas withholding tax 
 suffered                          12         -        12         -         -         - 
---------------------------  --------  --------  --------  --------  --------  -------- 
                                   12         -        12         -         -         - 
---------------------------  --------  --------  --------  --------  --------  -------- 
 

The tax charged for the period is lower than the standard rate of corporation tax in the UK of 25% (2022: 19%). The differences are explained below:

 
                                       Year ended 31 March 2023      Year ended 31 March 2022 
                                      Revenue   Capital     Total   Revenue   Capital     Total 
                                      GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
-----------------------------------  --------  --------  --------  --------  --------  -------- 
Net (loss)/profit before 
 taxation                                 217   (4,295)   (4,078)       451    21,701    22,152 
-----------------------------------  --------  --------  --------  --------  --------  -------- 
Theoretical tax at UK corporation 
 tax rate of 19% (2022: 19%)               41     (816)     (775)        86     4,123     4,209 
Effects of: 
UK dividends that are not 
 taxable                                (517)         -     (517)     (489)         -     (489) 
Non-taxable investment gains                -       816       816         -   (4,586)   (4,586) 
Irrecoverable overseas withholding 
 tax                                       12         -        12         -         -         - 
Unrelieved excess management 
 expenses                                 476         -       476       403       463       866 
-----------------------------------  --------  --------  --------  --------  --------  -------- 
                                           12         -        12         -         -         - 
-----------------------------------  --------  --------  --------  --------  --------  -------- 
 

Factors that may affect future tax charges

At 31 March 2023, the Company had no unprovided deferred tax liabilities (2022: GBPnil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of GBP12,759,000 (2022: GBP10,386,000) that are available to offset future taxable revenue. A deferred tax asset of GBP3,000,000 (2022: GBP2,597,000) has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

6. (Loss)/earning per ordinary share

The capital, revenue and total return per ordinary share are based on the net (loss)/profit shown in the Income Statement and the weighted average number of ordinary shares during the period of 104,414,502 (2022: 92,499,592).

There are no dilutive instruments issued by the Company.

7. Investments held at fair value through profit or loss

 
                                                          As at     As at 
                                                       31 March  31 March 
                                                           2023      2022 
                                                        GBP'000   GBP'000 
-----------------------------------------------------  --------  -------- 
Opening book cost                                       128,482    83,896 
Opening unrealised investment holding gains              26,866    25,363 
-----------------------------------------------------  --------  -------- 
Opening fair value                                      155,348   109,259 
-----------------------------------------------------  --------  -------- 
Analysis of transactions made during the year 
Purchases at cost                                       108,859    90,472 
Sales proceeds received                                (79,511)  (68,528) 
Gains on sales of investments                            25,112    22,642 
Unrealised (losses)/gains on investment holding        (29,414)     1,503 
-----------------------------------------------------  --------  -------- 
Closing fair value                                      180,394   155,348 
-----------------------------------------------------  --------  -------- 
Closing book cost                                       182,942   128,482 
Closing unrealised investment holding (losses)/gains    (2,548)    26,866 
-----------------------------------------------------  --------  -------- 
Closing fair value                                      180,394   155,348 
-----------------------------------------------------  --------  -------- 
Transaction costs                                           645       521 
-----------------------------------------------------  --------  -------- 
 

The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:

   -    Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. 

An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in Level 1, if they reflect actual and regularly occurring market transactions on an arms length basis.

- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

- Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

 
                              As at 31 March 2023                 As at 31 March 2022 
                                  Level    Level    Level             Level    Level    Level 
                         Total        1        2        3    Total        1        2        3 
                       GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000  GBP'000 
---------------------  -------  -------  -------  -------  -------  -------  -------  ------- 
Quoted at fair value   180,394  174,832    5,562        -  155,348  155,348        -        - 
---------------------  -------  -------  -------  -------  -------  -------  -------  ------- 
Total                  180,394  174,832    5,562        -  155,348  155,348        -        - 
---------------------  -------  -------  -------  -------  -------  -------  -------  ------- 
 

During the year ended 31 March 2023, GBP5,562,000 of level 1 investments were transferred to level 2 (2022: no transfer).

8. Trade and other receivables

 
                                As at     As at 
                             31 March  31 March 
                                 2023      2022 
                              GBP'000   GBP'000 
---------------------------  --------  -------- 
Due from brokers                  749       305 
Dividend income receivable        337        84 
Other receivables                  60        31 
---------------------------  --------  -------- 
                                1,146       420 
---------------------------  --------  -------- 
 

9. Trade and other payables

 
                               As at     As at 
                            31 March  31 March 
                                2023      2022 
                             GBP'000   GBP'000 
--------------------------  --------  -------- 
Due to brokers                 1,101       208 
Portfolio management fees        483       379 
Performance fees                   -     2,436 
Other payables                   121       126 
--------------------------  --------  -------- 
                               1,705     3,149 
--------------------------  --------  -------- 
 

10. Share capital

 
                                      Year ended 31 March    Year ended 31 March 
                                              2023                   2022 
                                        Number of              Number of 
                                           Shares  GBP'000        Shares  GBP'000 
-----------------------------------  ------------  -------  ------------  ------- 
Issued and fully paid: 
Ordinary shares of 1p: 
Balance at beginning of the period     96,248,053      962    88,257,211      883 
-----------------------------------  ------------  -------  ------------  ------- 
Shares issued during the year          16,697,000      167     7,990,842       79 
Balance at end of the period          112,945,053    1,129    96,248,053      962 
-----------------------------------  ------------  -------  ------------  ------- 
 

Special distributable reserve

Upon initial placing and subsequent issuance of the Company's ordinary shares on 1 May 2018 and 27 June 2018 respectively, the Company accumulated a premium account of GBP85,495,000. Following approval of the Court, effective on 8 August 2018, the share premium account was cancelled and the balance after cancellation cost of GBP20,000 was transferred to the special distributable reserve.

The Company currently has no shares in treasury. During the year, the Company also issued 16,697,000 new ordinary shares (2022: 7,990,842). On 22 May 2020, the Company purchased 275,000 of its own ordinary shares at a total cost of GBP230,000 and these shares were placed into treasury, but were subsequently reissued to the market during the year ended 31 March 2022.

11. Net asset value per ordinary share

The basic net asset value per ordinary share is based on net assets of GBP181,205,000 (2022: GBP157,816,000) and the number of ordinary shares in issue of 112,945,053 (2022: 96,248,053).

There are no dilutive instruments issued by the Company.

12. Financial Instruments

Investment objective and policy

The Company primarily invests in smaller company equities quoted on markets operated by the London Stock Exchange which the Portfolio Manager believes are trading below intrinsic value and where this value can be increased through strategic, operational, management and financial initiatives.

The Company's financial instruments include its investment portfolios, cash balances, trade receivables and trade payables that arise directly from its operations. Adherence to the Company's investment policy is key to mitigating risk.

Risks

The Portfolio Manager monitors the financial risks affecting the Company on an ongoing basis and the Board regularly receives financial information, which is used to identify and monitor risk. All risks are actively reviewed and managed by the Board.

The risks identified arising from the Company's financial instruments are:

   (i)   market risk, including market price risk, interest rate risk and currency risk; 
   (ii)   liquidity risk; 

(iii) credit and counterparty risk

(i) Market risk

Market risk is the risk of loss arising from movements in observable market variables. The fair value of future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. The Portfolio Manager assesses the exposure to market risk when making each investment decision and these risks are monitored by the Portfolio Manager on a regular basis and the Board at meetings with the Portfolio Manager.

Market price risk

The Company is exposed to market price risk (i.e. changes in market prices other than those arising from currency or interest rate risk) which may affect the value of investments whose future prices are uncertain. The Company's exposure to market price risk comprises movements in the value of the Company's investments. If the fair value of the Company's investments at the year-end increased or decreased by 10%, then it would have had an impact on the Company's capital return and equity of GBP18,039,000 (2022: GBP15,535,000).

The Portfolio Manager manages this risk by following the investment objective as set out in the prospectus. The Portfolio Manager assesses the exposure to market price risk when making each investment decision and monitors the overall level of market price risk on the whole investment portfolio on an ongoing basis. The Portfolio Manager maintains a net cash position and intends to maintain this for the foreseeable future.

Currency risk

Currency risk is the risk that fair values of future cash flows of a financial instrument fluctuate because of changes in foreign exchange rates. The Company held two investments in foreign currencies as at 31 March 2023 (2022: none). Whilst the Company's other investments are denominated in Sterling, the Company may have currency exposure through the trading activities of its investee companies.

The Portfolio Manager does not hedge underlying portfolio companies.

Foreign currency exposures

The Company has two investments denominated in foreign currencies and their respective fair values are shown below. The Company has no other foreign currency denominated assets or liabilities.

 
                            As at           As at 
                         31 March        31 March 
                             2023            2022 
                          GBP'000         GBP'000 
  ---------------  --------------  -------------- 
  Euro                      2,839               - 
  Norwegian krone           5,563               - 
  ---------------  --------------  -------------- 
                            8,402               - 
  ---------------  --------------  -------------- 
 

Foreign currency sensitivity

The table below shows the impact on the Company's net loss after taxation for the year ended and net assets as at 31 March 2023, if sterling had strengthened/weakened by 10% against the Euro and Norwegian krone.

 
                             As at           As at 
                          31 March        31 March 
                              2023            2022 
                           GBP'000         GBP'000 
  ---------------  ---------------  -------------- 
  Euro                   (258)/315               - 
  Norwegian krone        (506)/618               - 
  ---------------  ---------------  -------------- 
                         (764)/933               - 
  ---------------  ---------------  -------------- 
 

Interest rate risk

Interest rate risk is the risk that fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate movements may potentially affect future cash flows from the level of income receivable on cash deposits.

The Company's bank balances are subject to a variable rate of interest, it does not generate significant income from interest and the Portfolio Manager does not hedge against this. The Company has no gearing and therefore there is limited downside risk from increasing interest costs on borrowings.

If the Company maintained the following level of cash for a year GBP1,370,000 (2022: GBP5,197,000), a 1% increase in interest rates would increase the revenue return and net assets by GBP14,000 (2022: GBP52,000). If there was a fall of 1% in interest rates, the total effect would be a revenue reduction/cost increase of GBP14,000 (2022: GBP52,000).

The Portfolio Manager actively manages the cash positions of the Company.

(ii) Liquidity risk

The Company's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments and obligations. Liquidity risk is mitigated by the fact that the Company has GBP1,370,000 (2022: GBP5,197,000) cash at bank and the assets are readily realisable. The Company is a closed-end fund and assets do not need to be liquidated to meet redemptions.

The Portfolio Manager maintains a net cash position and intends to maintain this for the foreseeable future. The Portfolio Manager will manage the portfolio to maintain sufficient cash balances to meet its obligations or liabilities as they fall due.

(iii) Credit risk

This is the risk a counterparty of the Company will not meet their obligations to the Company.

The Company does not have any significant exposure to credit risk arising from one individual party. Credit risk is spread across a number of counterparties, each having an immaterial effect on the Company's cash flows, should a default happen. The credit standing of all counterparties is reviewed periodically and assesses the debtors to ensure they are neither past due or impaired.

All the investments of the Company which are traded on a recognised exchange are held by the Company's custodian, RBC Investor Services Trust ("RBC"). All the Company's cash is also held by RBC. The Portfolio Manager and the Board actively monitor the relationship with RBC and review RBC's internal control report.

13. Related party transactions

The amount incurred in respect of Portfolio Management fees during the period to 31 March 2023 was GBP1,718,000 (2022: 1,459,000), of which GBP483,000 (2022: GBP379,000) was outstanding at 31 March 2023. The amount accrued in relation to the performance fee provision as at 31 March 2023 was GBPnil (2022: GBP2,436,000).

Fees paid to the Company's Directors and Directors' shareholdings, are disclosed in the Directors' Remuneration Report. At the year end, there were no outstanding fees payable to Directors (2022: GBPnil).

14. Subsequent events

There have been no events with material impact on the Company since the Balance Sheet date.

Glossary

AGM

Annual General Meeting

AIC

Association of Investment Companies

Alternative Performance Measure (APM)

An APM is a numerical measure of the Company's current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework.

Comparator Benchmark

The Company's Comparator Benchmark is the NSCI (Numis Smaller Companies Index) ex IC plus AIM Total Return Index. The benchmark is used only as a yard stick to compare investment performance.

Cost

The book cost of each investment is the total acquisition value, including transaction costs, less the value of any disposals or capitalised distributions allocated on a weighted average cost basis.

Discount/premium (APM)

A description of the difference between the share price and the net asset value per share. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.

 
                                 31 March  31 March 
Premium/(Discount) Calculation       2023      2022 
-------------------------------  --------  -------- 
Closing NAV per share (p)           160.4     164.0  a 
Closing share price (p)             164.0     166.0  b 
Premium 
(c=((b-a)/a) x 100) (%)              2.2%      1.2%  c 
-------------------------------  --------  -------- 
 

The discount and performance are calculated in accordance with guidelines issued by the AIC. The discount is calculated using the net asset values per share inclusive of accrued income with debt at market value.

ESG

Environmental, social and governance

EU

European Union

FCA

Financial Conduct Authority

Gearing

Gearing refers to the ratio of the Company's debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. If the Company's assets fall, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. The Company had no borrowings during the year (2022:nil).

IPO

Initial public offering

Key Performance Indicators (KPIs)

KPIs are a shortlist of corporate attributes that are used to assess the general progress of the Company. These are outlined in the Strategic Report.

M&A

Mergers and acquisitions

Net Asset Value ('NAV') per Share

The NAV is shareholders' funds expressed as an amount per individual share. Shareholders' funds are the total value of all of the Company's assets, at their current market value, having deducted all liabilities and prior charges at their par value, or at their asset value as appropriate. The total NAV per share is calculated by dividing shareholders' funds of GBP181,205,000 (2022: GBP157,816,000) by the number of Ordinary Shares in issue 112,945,053 (2022: 96,248,053) at the year end.

NAV Total Return (APM)

NAV total return is the closing NAV per share including any cumulative dividends paid as a percentage over the opening NAV. NAV total return is an alternative way of measuring investment management performance of investment trusts which is not affected by movements in the share price.

 
                                                Inception 
                                                       to 
                            31 March  31 March   31 March 
                                2023      2022       2023 
--------------------------  --------  --------  --------- 
Closing NAV per share (p)      160.4     164.0      160.4  a 
Opening NAV Per share (p)      160.4     139.3      100.0  b 
Dividend reinvested (p)            -         -          - 
NAV total (loss)/return 
(c= ((a-b)/b x 100) (%)       (2.2)%     17.7%      60.4%  c 
--------------------------  --------  --------  --------- 
 

NSCI ex IT plus AIM Index

Numis Smaller Companies ex Investment Trust plus AIM Index.

 
                                                 1 May 
                                               2018 to 
                          31 March  31 March  31 March 
                              2023      2022      2023 
------------------------  --------  --------  -------- 
Closing index               15,187    17,530    15,187  a 
Opening index               17,530    17,913    14,955  b 
NAV total (loss)/return 
(c= ((a-b)/b x 100) (%)    (13.4)%    (2.1)%      1.6%  c 
------------------------  --------  --------  -------- 
 

Ongoing Charges Ratio (APM)

As recommended by the AIC in its guidance, ongoing charges are the Company's annualised expenses (excluding finance costs and certain non-recurring items) expressed as a percentage of the average monthly net assets of the Company during the year as disclosed to the London Stock Exchange Performance fees are excluded from the calculation.

 
                                            31 March     31 March 
                                                2023         2022 
---------------------------------------  -----------  ----------- 
Ongoing charges (a)                        2,503,000    2,122,000 
Average net asset value (b)              172,320,000  145,968,000 
Ongoing charges (a/b) expressed as a %         1.45%        1.45% 
---------------------------------------  -----------  ----------- 
 

P/E

Price earnings ratio

R&D

Research and development

TMT

Technology, media and telecom

Total assets

Total assets are the sum of both fixed and current assets with no deductions.

Share Price Total Return (APM)

Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. The combined effect of any dividends paid, together with the rise or fall in the share price. This is calculated by the movement in the share price plus dividend income reinvested by the Company at the prevailing share price.

 
                                  31 March  31 March 
Share Price Total Return              2023      2022 
--------------------------------  --------  -------- 
Closing share price (p)              164.0     166.0  a 
Opening share price (p)              166.0     129.0  b 
Dividend reinvested (p)                  -         - 
Share price total (loss)/return 
(c= ((a-b)/b x 100) (%)             (1.2)%     28.7%  c 
--------------------------------  --------  -------- 
 

UCITS

Undertakings for the Collective Investment in Transferable Securities

Volatility

The term volatility describes how much and how quickly the share price or net asset value has tended to change in the past. Those investments with the greatest movement in their share prices are known as having high volatility, whereas those with a narrow range of change are known as having low volatility.

The Annual Report will be posted to shareholders on or around 16 June 2023.

Further copies may be obtained from the Company Secretary: Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL.

A copy of the Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report will also be available on the Company's website at www.oitplc.com where up-to-date information on the Company, including daily NAV, share prices and fact sheets, can also be found.

The Annual General Meeting will be held on Thursday, 21 September 2023.

- END -

For Further Information please contact

Mark Pope

Frostrow Capital LLP

Company Secretary

0203 008 4913

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FR SDSSMFEDSESI

(END) Dow Jones Newswires

May 31, 2023 02:04 ET (06:04 GMT)